Institutional investors may adopt severe steps after Third Coast Bancshares, Inc.'s (NASDAQ:TCBX) latest 16% drop adds to a year losses

Key Insights

• Institutions' substantial holdings in Third Coast Bancshares implies that they have significant influence over the company's share price
• A total of 16 investors have a majority stake in the company with 50% ownership
• Insiders have been buying lately

If you want to know who really controls Third Coast Bancshares, Inc. (NASDAQ:TCBX), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 40% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, institutional investors endured the highest losses last week after market cap fell by US$39m. The recent loss, which adds to a one-year loss of 34% for stockholders, may not sit well with this group of investors. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the decline continues, institutional investors may be pressured to sell Third Coast Bancshares which might hurt individual investors.

Let's delve deeper into each type of owner of Third Coast Bancshares, beginning with the chart below.

View our latest analysis for Third Coast Bancshares

What Does The Institutional Ownership Tell Us About Third Coast Bancshares?

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 Third Coast Bancshares. 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. 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 Third Coast Bancshares' historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Third Coast Bancshares. Our data shows that Castle Creek Advisors VIII LLC is the largest shareholder with 11% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.7% and 4.6%, of the shares outstanding, respectively.

After doing some more digging, we found that the top 16 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Third Coast Bancshares

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

We can report that insiders do own shares in Third Coast Bancshares, Inc.. As individuals, the insiders collectively own US$19m worth of the US$201m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

With a 37% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Third Coast Bancshares. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Equity Ownership

With an ownership of 11%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

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.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

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.