While institutions invested in FreightCar America, Inc. (NASDAQ:RAIL) benefited from last week's 14% gain, individual investors stood to gain the most

Key Insights

• FreightCar America's significant individual investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• 51% of the business is held by the top 17 shareholders
• Recent sales by insiders

To get a sense of who is truly in control of FreightCar America, Inc. (NASDAQ:RAIL), it is important to understand the ownership structure of the business. We can see that individual investors own the lion's share in the company with 44% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While individual investors were the group that benefitted the most from last week’s US$25m market cap gain, institutions too had a 30% share in those profits.

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

View our latest analysis for FreightCar America

What Does The Institutional Ownership Tell Us About FreightCar America?

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.

FreightCar America already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at FreightCar America's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in FreightCar America. The company's largest shareholder is Fabricaciones y Servicios de México, S.A. de C.V., with ownership of 10%. With 8.4% and 8.2% of the shares outstanding respectively, Continental General Insurance Company, Asset Management Arm and Pacific Investment Management Company LLC are the second and third largest shareholders. Additionally, the company's CEO Nicholas Randall directly holds 0.8% of the total shares outstanding.

A closer look at our ownership figures suggests that the top 17 shareholders have a combined ownership of 51% 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. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of FreightCar America

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.

It seems insiders own a significant proportion of FreightCar America, Inc.. Insiders own US$26m worth of shares in the US$186m company. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 44% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

It seems that Private Companies own 12%, of the FreightCar America stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

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. Case in point: We've spotted 3 warning signs for FreightCar America 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.