Institutional owners may consider drastic measures as Enovix Corporation's (NASDAQ:ENVX) recent US$71m drop adds to long-term losses




  • In Business
  • 2022-11-29 12:31:42Z
  • By Simply Wall St.
 

Every investor in Enovix Corporation (NASDAQ:ENVX) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 47% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$1.9b last week after a 3.7% drop in the share price. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 67% for shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in Enovix's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

In the chart below, we zoom in on the different ownership groups of Enovix.

See our latest analysis for Enovix

What Does The Institutional Ownership Tell Us About Enovix?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Enovix already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Enovix's earnings history below. Of course, the future is what really matters.

Our data indicates that hedge funds own 5.8% of Enovix. 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. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In Enovix's case, its Top Key Executive, Thurman Rodgers, is the largest shareholder, holding 14% of shares outstanding. Eclipse Ventures, LLC is the second largest shareholder owning 8.0% of common stock, and The Vanguard Group, Inc. holds about 7.1% of the company stock. Additionally, the company's CEO Harrold Rust directly holds 0.9% of the total shares outstanding.

On further inspection, we found that more than half the company's shares are owned by the top 9 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Enovix

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our information suggests that insiders maintain a significant holding in Enovix Corporation. It is very interesting to see that insiders have a meaningful US$345m stake in this US$1.9b business. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 20% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Enovix. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Equity Ownership

Private equity firms hold a 8.0% stake in Enovix. This suggests they can be influential in key policy decisions. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Enovix better, we need to consider many other factors. To that end, you should learn about the 4 warning signs we've spotted with Enovix (including 2 which make us uncomfortable) .

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

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.

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