Insignia Financial Ltd. (ASX:IFL) is largely controlled by institutional shareholders who own 51% of the company
Key Insights
Given the large stake in the stock by institutions, Insignia Financial's stock price might be vulnerable to their trading decisions
50% of the business is held by the top 13 shareholders
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
Every investor in Insignia Financial Ltd. (ASX:IFL) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 51% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.
In the chart below, we zoom in on the different ownership groups of Insignia Financial.
View our latest analysis for Insignia Financial
What Does The Institutional Ownership Tell Us About Insignia Financial?
Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.
We can see that Insignia Financial 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. 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 Insignia Financial, (below). Of course, keep in mind that there are other factors to consider, too.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in Insignia Financial. Looking at our data, we can see that the largest shareholder is Yarra Capital Management with 6.2% of shares outstanding. For context, the second largest shareholder holds about 6.1% of the shares outstanding, followed by an ownership of 5.2% by the third-largest shareholder.
After doing some more digging, we found that the top 13 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.
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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Insignia Financial
The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.
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 report that insiders do own shares in Insignia Financial Ltd.. The insiders have a meaningful stake worth AU$62m. Most would see this as a real positive. If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.
General Public Ownership
With a 41% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Insignia Financial. 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 5.2%, private equity firms could influence the Insignia Financial board. 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.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Insignia Financial better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Insignia Financial (of which 1 is concerning!) you should know about.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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