LendingClub Corporation (NYSE:LC) is favoured by institutional owners who hold 75% of the company
Key Insights
Institutions' substantial holdings in LendingClub implies that they have significant influence over the company's share price
A total of 13 investors have a majority stake in the company with 50% ownership
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
If you want to know who really controls LendingClub Corporation (NYSE:LC), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 75% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).
Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.
Let's delve deeper into each type of owner of LendingClub, beginning with the chart below.
See our latest analysis for LendingClub
What Does The Institutional Ownership Tell Us About LendingClub?
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.
As you can see, institutional investors have a fair amount of stake in LendingClub. 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.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. LendingClub is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 10% of shares outstanding. In comparison, the second and third largest shareholders hold about 8.8% and 8.6% of the stock. Additionally, the company's CEO Scott Sanborn directly holds 1.3% of the total shares outstanding.
Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 13 shareholders, meaning that no single shareholder has a majority interest in the ownership.
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 LendingClub
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
Shareholders would probably be interested to learn that insiders own shares in LendingClub Corporation. It has a market capitalization of just US$882m, and insiders have US$30m worth of shares, in their own names. 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
With a 21% ownership, the general public, mostly comprising of individual investors, have some degree of sway over LendingClub. 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 LendingClub better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with LendingClub (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.
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.
