Institutions' substantial holdings in MercadoLibre implies that they have significant influence over the company's share price
A total of 17 investors have a majority stake in the company with 50% ownership
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
If you want to know who really controls MercadoLibre, Inc. (NASDAQ:MELI), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 82% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).
Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.
In the chart below, we zoom in on the different ownership groups of MercadoLibre.
What Does The Institutional Ownership Tell Us About MercadoLibre?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
MercadoLibre already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see MercadoLibre's historic earnings and revenue below, but keep in mind there's always more to the story.
earnings-and-revenue-growth
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in MercadoLibre. The company's largest shareholder is Baillie Gifford & Co., with ownership of 9.6%. Capital Research and Management Company is the second largest shareholder owning 9.4% of common stock, and Galperin Trust holds about 7.2% of the company stock.
After doing some more digging, we found that the top 17 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of MercadoLibre
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our information suggests that MercadoLibre, Inc. insiders own under 1% of the company. However, it's possible that insiders might have an indirect interest through a more complex structure. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own US$92m worth of shares (at current prices). In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.
General Public Ownership
With a 11% ownership, the general public, mostly comprising of individual investors, have some degree of sway over MercadoLibre. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
Private Company Ownership
It seems that Private Companies own 7.4%, of the MercadoLibre stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.
Next Steps:
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
