Institutional investors may adopt severe steps after Insignia Financial Ltd.'s (ASX:IFL) latest 5.6% drop adds to a year losses

Key Insights

• Given the large stake in the stock by institutions, Insignia Financial's stock price might be vulnerable to their trading decisions
• The top 7 shareholders own 54% of the company
• Recent purchases by insiders

Every investor in Insignia Financial Ltd. (ASX:IFL) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 64% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And so it follows that institutional investors was the group most impacted after the company's market cap fell to AU$1.6b last week after a 5.6% drop in the share price. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 20% for shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the downtrend continues, institutions may face pressures to sell Insignia Financial, which might have negative implications on individual investors.

Let's take a closer look to see what the different types of shareholders can tell us about Insignia Financial.

Check out our latest analysis for Insignia Financial

What Does The Institutional Ownership Tell Us About Insignia Financial?

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.

Insignia Financial already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Insignia Financial'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. Insignia Financial is not owned by hedge funds. The company's largest shareholder is Tanarra Capital Australia Pty Ltd, with ownership of 14%. In comparison, the second and third largest shareholders hold about 9.0% and 8.2% of the stock.

We also observed that the top 7 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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 Insignia Financial

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 Insignia Financial Ltd.. As individuals, the insiders collectively own AU$52m worth of the AU$1.6b company. 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, who are usually individual investors, hold a 18% stake in Insignia Financial. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With an ownership of 14%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 3 warning signs for Insignia Financial (1 is significant) that you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.