In the wake of Pacific Basin Shipping Limited's (HKG:2343) latest HK$713m market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Significantly high institutional ownership implies Pacific Basin Shipping's stock price is sensitive to their trading actions
• The top 7 shareholders own 51% of the company
• Insiders have bought recently

A look at the shareholders of Pacific Basin Shipping Limited (HKG:2343) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 73% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And institutional investors endured the highest losses after the company's share price fell by 6.4% last week. The recent loss, which adds to a one-year loss of 1.2% for stockholders, may not sit well with this group of investors. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in Pacific Basin Shipping's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

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

Check out our latest analysis for Pacific Basin Shipping

What Does The Institutional Ownership Tell Us About Pacific Basin Shipping?

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 Pacific Basin Shipping 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. 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 Pacific Basin Shipping, (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 Pacific Basin Shipping. M&G Investment Management Limited is currently the largest shareholder, with 12% of shares outstanding. For context, the second largest shareholder holds about 10% of the shares outstanding, followed by an ownership of 9.3% by the third-largest shareholder.

We did some more digging and found that 7 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Pacific Basin Shipping

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.

Our most recent data indicates that insiders own less than 1% of Pacific Basin Shipping Limited. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own HK$21m worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

With a 26% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Pacific Basin Shipping. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Pacific Basin Shipping better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Pacific Basin Shipping you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.