Key Insights

• The considerable ownership by private equity firms in CPI Card Group indicates that they collectively have a greater say in management and business strategy
• 56% of the company is held by a single shareholder (Parallel49 Equity, ULC)
• Institutional ownership in CPI Card Group is 21%

A look at the shareholders of CPI Card Group Inc. (NASDAQ:PMTS) can tell us which group is most powerful. The group holding the most number of shares in the company, around 56% to be precise, is private equity firms. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While the holdings of private equity firms took a hit after last week's 17% price drop, institutions with their 21% holdings also suffered.

Let's delve deeper into each type of owner of CPI Card Group, beginning with the chart below.

What Does The Institutional Ownership Tell Us About CPI Card Group?

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.

As you can see, institutional investors have a fair amount of stake in CPI Card Group. 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 CPI Card Group's historic earnings and revenue below, but keep in mind there's always more to the story.

CPI Card Group is not owned by hedge funds. Parallel49 Equity, ULC is currently the company's largest shareholder with 56% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. The Vanguard Group, Inc. is the second largest shareholder owning 3.1% of common stock, and BlackRock, Inc. holds about 2.4% of the company stock.

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 CPI Card Group

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.

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.

We can see that insiders own shares in CPI Card Group Inc.. In their own names, insiders own US$8.5m worth of stock in the US$317m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 20% stake in CPI Card Group. 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

With a stake of 56%, private equity firms could influence the CPI Card Group board. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with CPI Card Group (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com