Institutional investors may overlook Green Brick Partners, Inc.'s (NYSE:GRBK) recent US$162m market cap drop as long-term gains remain positive

Key Insights

• Given the large stake in the stock by institutions, Green Brick Partners' stock price might be vulnerable to their trading decisions
• 52% of the business is held by the top 7 shareholders
• Insiders have been selling lately

Every investor in Green Brick Partners, Inc. (NYSE:GRBK) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 57% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Institutional investors endured the highest losses after the company's market cap fell by US$162m last week. However, the 87% one-year return to shareholders might have softened the blow. They should, however, be mindful of further losses in the future.

In the chart below, we zoom in on the different ownership groups of Green Brick Partners.

See our latest analysis for Green Brick Partners

What Does The Institutional Ownership Tell Us About Green Brick Partners?

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.

We can see that Green Brick Partners does have institutional investors; and they hold a good portion of the company's stock. 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 Green Brick Partners' historic earnings and revenue below, but keep in mind there's always more to the story.

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 21% of Green Brick Partners 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. The company's largest shareholder is Greenlight Capital, Inc., with ownership of 21%. BlackRock, Inc. is the second largest shareholder owning 10% of common stock, and The Vanguard Group, Inc. holds about 5.6% of the company stock. In addition, we found that James Brickman, the CEO has 4.3% 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 7 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Green Brick Partners

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

We can see that insiders own shares in Green Brick Partners, Inc.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around US$280m worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Green Brick Partners. 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 instance, we've identified 2 warning signs for Green Brick Partners (1 shouldn't be ignored) that 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.