The big shareholder groups in LendingClub Corporation (NYSE:LC) have power over the company. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. We also tend to see lower insider ownership in companies that were previously publicly owned.
With a market capitalization of US$403m, LendingClub is a small cap stock, so it might not be well known by many institutional investors. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. Let's take a closer look to see what the different types of shareholder can tell us about LendingClub.
What Does The Institutional Ownership Tell Us About LendingClub?
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.
We can see that LendingClub does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone, since institutions make bad investments sometimes, just like everyone does. 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 LendingClub's historic earnings and revenue, below, but keep in mind there's always more to the story.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. LendingClub is not owned by hedge funds. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 11% of shares outstanding. With 9.0% and 8.1% of the shares outstanding respectively, Nikko Asset Management Co., Ltd. and Morgan Stanley, Investment Banking and Brokerage Investments are the second and third largest shareholders. Additionally, the company's CEO Scott Sanborn directly holds 0.010002200000000001 of the total shares outstanding.
We did some more digging and found that 7 of the top shareholders account for roughly 53% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of LendingClub
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.
I can report that insiders do own shares in LendingClub Corporation. As individuals, the insiders collectively own US$13m worth of the US$403m 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 holds a 12% stake in LC. 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.
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. For instance, we've identified 2 warning signs for LendingClub that you should be aware of.
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.
This article by Simply Wall St is general in nature. 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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