Key Insights

• Significantly high institutional ownership implies Farfetch's stock price is sensitive to their trading actions
• 51% of the business is held by the top 13 shareholders
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

To get a sense of who is truly in control of Farfetch Limited (NYSE:FTCH), it is important to understand the ownership structure of the business. With 63% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutional investors endured the highest losses after the company's share price fell by 8.0% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 78% for shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. Hence, if weakness in Farfetch's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

Let's take a closer look to see what the different types of shareholders can tell us about Farfetch.

Check out our latest analysis for Farfetch

What Does The Institutional Ownership Tell Us About Farfetch?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that Farfetch does have institutional investors; and they hold a good portion of the company's stock. 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 Farfetch, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Farfetch. Our data shows that Baillie Gifford & Co. is the largest shareholder with 11% of shares outstanding. In comparison, the second and third largest shareholders hold about 11% and 8.6% of the stock.

A closer look at our ownership figures suggests that the top 13 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Farfetch

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 data suggests that insiders own under 1% of Farfetch Limited in their own names. However, it's possible that insiders might have an indirect interest through a more complex structure. It has a market capitalization of just US$637m, and the board has only US$1.7m worth of shares in their own names. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 17% stake in Farfetch. 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 8.6%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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.

Private Company Ownership

Our data indicates that Private Companies hold 11%, of the company's shares. 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. To that end, you should learn about the 3 warning signs we've spotted with Farfetch (including 1 which is concerning) .

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.

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.