Despite recent sales, Consumer Portfolio Services, Inc. (NASDAQ:CPSS) insiders still control 35% of the company

Key Insights

• Significant insider control over Consumer Portfolio Services implies vested interests in company growth
• 53% of the business is held by the top 4 shareholders
• Insiders have sold recently

We've discovered 3 warning signs about Consumer Portfolio Services. View them for free.

To get a sense of who is truly in control of Consumer Portfolio Services, Inc. (NASDAQ:CPSS), it is important to understand the ownership structure of the business. We can see that individual insiders own the lion's share in the company with 35% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Insiders own the top position in the company’s share registry despite recent sales and as a result, were the biggest beneficiaries of last week’s 15% gain.

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

Check out our latest analysis for Consumer Portfolio Services

What Does The Institutional Ownership Tell Us About Consumer Portfolio Services?

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.

We can see that Consumer Portfolio Services 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 Consumer Portfolio Services' historic earnings and revenue below, but keep in mind there's always more to the story.

Consumer Portfolio Services is not owned by hedge funds. Black Diamond Capital Management, L.L.C. is currently the company's largest shareholder with 24% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 18% and 7.4%, of the shares outstanding, respectively. Charles Bradley, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

To make our study more interesting, we found that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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. 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 Consumer Portfolio Services

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

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.

Our information suggests that insiders maintain a significant holding in Consumer Portfolio Services, Inc.. Insiders own US$68m worth of shares in the US$196m 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, who are usually individual investors, hold a 16% stake in Consumer Portfolio Services. 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.

Private Equity Ownership

With an ownership of 24%, 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 3 warning signs for Consumer Portfolio Services (1 is potentially serious) that you should be aware of.

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.