Ownership Fair Market Value?
According to SimplyWallStreet, at a share price of C$3.80, Largo’s Market Cap is well below (86.6% undervalued) its Fair Market Value of C$28.44 estimated based on a Discounted Cash Flow model (details of the estimation are not available on SimplyWallStreet website).
Ownership structure
Private Equity Firms: ~44%
General Public: ~32%
Other Institutions: ~24%
Company's Insiders: 0.4% (No skin in the game. What a shame!)
We can see that institutional investors (PE firms and others) claim ~68% ownership thus facing the maximum upside or downside impact depending on which way the share prices fluctuate. The primary upside about institutional ownership is that it is seen as “smart money” with resources / brain power to perform in-depth risk-reward analysis prior to making their investment decisions (this doesn’t mean that they are always 100% right but at least it would enhance their chances of reducing risks). The primary downside of institutional ownership is the pressure of institutional owner selling. An institutional owner selling may cause a large volume of shares to be dumped on the market in a short period of time thus having a potential fast / furious negative impact on the sp. The low average daily volume (~25K shares) is a clear indication that there is no institutional sell-off with regard to LGO, a situation which makes me believe the current sp decline is mainly orchestrated by short sellers to give the impression that our stock is more bearish than it actually is.
Arias Resource is currently the largest shareholder with ~44% of the company stock followed by West Family Investments, Inc. (~8.7%) and Grantham Mayo Van Otterloo & Co. LLC (~8/3%). As we can see ~53% of Largo are under the control of the top 2 institutional investors with Arias having the lion’s share by far.
Black Nights often target underperforming companies for a quick profit. However any Black Knight wanting to acquire a big enough controlling interest of Largo to attempt an unwelcome take over bid must undoubtedly deal with Arias.
With Largo’s Market Cap declining more than 80% since the start of the transitional period under his Chairmanship / vision, Arias has already lost hundreds million C$ on paper. Will Arias continue to stand firm with Largo? Is he totally confident in the future of Largo to guide the company out of this temporary difficuly time? Will 2024 be our come back year? It does look promising, imho.