Painful week for private equity firms invested in Enviva Inc. (NYSE:EVA) after 7.0% drop, institutions also suffered losses

If you want to know who really controls Enviva Inc. (NYSE:EVA), then you’ll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are private equity firms with 42% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Following a 7.0% decrease in the stock price last week, private equity firms suffered the most losses, but institutions who own 34% stock also took a hit.

Let’s delve deeper into each type of owner of Enviva, beginning with the chart below.

However if you’d rather see where the opportunities and risks are within EVA’s industry, you can check out our analysis on the US Oil and Gas industry.

What Does The Institutional Ownership Tell Us About Enviva?

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.

Enviva 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Enviva, (below). Of course, keep in mind that there are other factors to consider, too.

It would appear that 7.8% of Enviva shares are controlled by hedge funds. That’s interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Riverstone Holdings LLC is currently the company’s largest shareholder with 42% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.8% and 4.8% of the stock. In addition, we found that John Keppler, the CEO has 1.1% of the shares allocated to their name.

After doing some more digging, we found that the top 3 shareholders collectively control more than half of the company’s shares, implying that they have considerable power to influence the company’s decisions.

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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Enviva

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own some shares in Enviva Inc.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around US$199m worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public– including retail investors — own 12% stake in the company, and hence can’t easily be ignored. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With an ownership of 42%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We’ve spotted 3 warning signs for Enviva you should be aware of, and 2 of them don’t sit too well with us.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.

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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.