Stock Analysis

Here's What Preferred Bank's (NASDAQ:PFBC) Shareholder Ownership Structure Looks Like

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NasdaqGS:PFBC
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If you want to know who really controls Preferred Bank (NASDAQ:PFBC), then you'll have to look at the makeup of its share registry. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.

With a market capitalization of US$792m, Preferred Bank is a small cap stock, so it might not be well known by many institutional investors. In the chart below, we can see that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about Preferred Bank.

View our latest analysis for Preferred Bank

ownership-breakdown
NasdaqGS:PFBC Ownership Breakdown February 22nd 2021

What Does The Institutional Ownership Tell Us About Preferred Bank?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

As you can see, institutional investors have a fair amount of stake in Preferred Bank. 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. 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 Preferred Bank's historic earnings and revenue below, but keep in mind there's always more to the story.

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NasdaqGS:PFBC Earnings and Revenue Growth February 22nd 2021

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in Preferred Bank. BlackRock, Inc. is currently the company's largest shareholder with 15% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.6% and 5.7% of the stock. Furthermore, CEO Li Yu is the owner of 5.1% of the company's shares.

We also observed that the top 10 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.

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 Preferred Bank

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

I can report that insiders do own shares in Preferred Bank. In their own names, insiders own US$68m worth of stock in the US$792m 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

With a 18% ownership, the general public have some degree of sway over Preferred Bank. 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 Preferred Bank better, we need to consider many other factors. To that end, you should be aware of the 3 warning signs we've spotted with Preferred Bank .

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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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