With 9.7% one-year returns, institutional owners may ignore Mercantile Bank Corporation's (NASDAQ:MBWM) 9.2% stock price decline

Key Insights

• Significantly high institutional ownership implies Mercantile Bank's stock price is sensitive to their trading actions
• The top 24 shareholders own 50% of the company
• Recent sales by insiders

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To get a sense of who is truly in control of Mercantile Bank Corporation (NASDAQ:MBWM), it is important to understand the ownership structure of the business. With 65% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Losing money on investments is something no shareholder enjoys, least of all institutional investors who saw their holdings value drop by 9.2% last week. Still, the 9.7% one-year gains may have helped mitigate their overall losses. But they would probably be wary of future losses.

In the chart below, we zoom in on the different ownership groups of Mercantile Bank.

Check out our latest analysis for Mercantile Bank

What Does The Institutional Ownership Tell Us About Mercantile Bank?

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 Mercantile Bank. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Mercantile Bank, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Mercantile Bank is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is BlackRock, Inc. with 10.0% of shares outstanding. In comparison, the second and third largest shareholders hold about 6.8% and 5.4% of the stock.

A closer look at our ownership figures suggests that the top 24 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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 Mercantile Bank

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

We can see that insiders own shares in Mercantile Bank Corporation. In their own names, insiders own US$22m worth of stock in the US$647m 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 32% stake in Mercantile Bank. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

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. For example, we've discovered 1 warning sign for Mercantile Bank that you should be aware of before investing here.

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.