Significantly high institutional ownership implies NexPoint Real Estate Finance's stock price is sensitive to their trading actions
The top 3 shareholders own 62% of the company
To get a sense of who is truly in control of NexPoint Real Estate Finance, Inc. (NYSE:NREF), it is important to understand the ownership structure of the business. With 51% 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. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.
Let's delve deeper into each type of owner of NexPoint Real Estate Finance, beginning with the chart below.
What Does The Institutional Ownership Tell Us About NexPoint Real Estate Finance?
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 NexPoint Real Estate Finance 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at NexPoint Real Estate Finance's earnings history below. Of course, the future is what really matters.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. It would appear that 31% of NexPoint Real Estate Finance shares are controlled by hedge funds. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Our data shows that Highland Capital Management, L.P. is the largest shareholder with 31% of shares outstanding. For context, the second largest shareholder holds about 19% of the shares outstanding, followed by an ownership of 12% by the third-largest shareholder. Furthermore, CEO James Dondero is the owner of 1.7% of the company's shares.
A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 62% stake.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of NexPoint Real Estate Finance
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.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Shareholders would probably be interested to learn that insiders own shares in NexPoint Real Estate Finance, Inc.. It has a market capitalization of just US$376m, and insiders have US$15m worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.
General Public Ownership
The general public-- including retail investors -- own 14% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for NexPoint Real Estate Finance 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.