Institutional owners may ignore Burford Capital Limited's (LON:BUR) recent UK£147m market cap decline as longer-term profits stay in the green
Key Insights
Given the large stake in the stock by institutions, Burford Capital's stock price might be vulnerable to their trading decisions
48% of the business is held by the top 25 shareholders
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
To get a sense of who is truly in control of Burford Capital Limited (LON:BUR), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 53% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Institutional investors endured the highest losses after the company's market cap fell by UK£147m last week. Still, the 63% one-year gains may have helped mitigate their overall losses. We would assume however, that they would be on the lookout for weakness in the future.
In the chart below, we zoom in on the different ownership groups of Burford Capital.
Check out our latest analysis for Burford Capital
What Does The Institutional Ownership Tell Us About Burford Capital?
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 Burford Capital 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 Burford Capital's historic earnings and revenue below, but keep in mind there's always more to the story.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in Burford Capital. The company's largest shareholder is Mithaq Capital, with ownership of 11%. In comparison, the second and third largest shareholders hold about 4.5% and 4.2% of the stock. Jonathan Molot, who is the second-largest shareholder, also happens to hold the title of Chief Investment Officer. In addition, we found that Christopher Bogart, the CEO has 3.5% of the shares allocated to their name.
A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.
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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of Burford Capital
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. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
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.
We can report that insiders do own shares in Burford Capital Limited. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around UK£207m 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 39% stake in the company, and hence can't easily be ignored. 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.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Burford Capital better, we need to consider many other factors. Take risks for example - Burford Capital has 3 warning signs (and 2 which shouldn't be ignored) we think you should know about.
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.
