In the wake of Matrix Service Company's (NASDAQ:MTRX) latest US$42m market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Given the large stake in the stock by institutions, Matrix Service's stock price might be vulnerable to their trading decisions
• The top 9 shareholders own 50% of the company
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

To get a sense of who is truly in control of Matrix Service Company (NASDAQ:MTRX), it is important to understand the ownership structure of the business. With 78% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$333m last week after a 11% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 3.7% might not go down well especially with this category of shareholders. 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 downtrend continues, institutions may face pressures to sell Matrix Service, 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 Matrix Service.

Check out our latest analysis for Matrix Service

What Does The Institutional Ownership Tell Us About Matrix Service?

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.

Matrix Service already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Matrix Service, (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. It would appear that 5.5% of Matrix Service shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Looking at our data, we can see that the largest shareholder is BlackRock, Inc. with 13% of shares outstanding. For context, the second largest shareholder holds about 5.5% of the shares outstanding, followed by an ownership of 5.1% by the third-largest shareholder. In addition, we found that John Hewitt, the CEO has 1.5% of the shares allocated to their name.

On further inspection, we found that more than half the company's shares are owned by the top 9 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Matrix Service

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.

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 see that insiders own shares in Matrix Service Company. It has a market capitalization of just US$333m, and insiders have US$15m worth of shares, in their own names. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 12% stake in Matrix Service. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

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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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.