First Merchants Corporation (NASDAQ:FRME) is a favorite amongst institutional investors who own 73%
Key Insights
Significantly high institutional ownership implies First Merchants' stock price is sensitive to their trading actions
The top 18 shareholders own 51% of the company
If you want to know who really controls First Merchants Corporation (NASDAQ:FRME), then you'll have to look at the makeup of its share registry. With 73% 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).
Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.
Let's delve deeper into each type of owner of First Merchants, beginning with the chart below.
View our latest analysis for First Merchants
What Does The Institutional Ownership Tell Us About First Merchants?
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 First Merchants 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. 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 First Merchants' historic earnings and revenue below, but keep in mind there's always more to the story.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. First Merchants is not owned by hedge funds. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 11%. With 8.0% and 4.8% of the shares outstanding respectively, BlackRock, Inc. and Dimensional Fund Advisors LP are the second and third largest shareholders.
A closer look at our ownership figures suggests that the top 18 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of First Merchants
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
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 most recent data indicates that insiders own some shares in First Merchants Corporation. This is a big company, so it is good to see this level of alignment. Insiders own US$33m worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.
General Public Ownership
The general public-- including retail investors -- own 26% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand First Merchants better, we need to consider many other factors. For example, we've discovered 2 warning signs for First Merchants (1 is concerning!) that you should be aware of before investing here.
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.
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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.
