In the wake of Burford Capital Limited's (NYSE:BUR) latest US$286m market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Significantly high institutional ownership implies Burford Capital's stock price is sensitive to their trading actions
• The top 20 shareholders own 51% of the company
• Recent purchases by insiders

We check all companies for important risks. See what we found for Burford Capital in our free report.

If you want to know who really controls Burford Capital Limited (NYSE:BUR), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 65% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$3.0b last week after a 9.1% drop in the share price. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 5.4% for shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the downtrend continues, institutions may face pressures to sell Burford Capital, which might have negative implications on individual investors.

In the chart below, we zoom in on the different ownership groups of Burford Capital.

See our latest analysis for Burford Capital

What Does The Institutional Ownership Tell Us About Burford Capital?

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.

Burford Capital 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 Burford Capital's earnings history below. Of course, the future is what really matters.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Burford Capital is not owned by hedge funds. Our data shows that Orbis Investment Management Limited is the largest shareholder with 5.9% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.1% and 4.8%, of the shares outstanding, respectively. Additionally, the company's CEO Christopher Bogart directly holds 0.6% of the total shares outstanding.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 20 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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 Burford Capital

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

We can report that insiders do own shares in Burford Capital Limited. 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$164m worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 26% stake in the company, and hence can't easily be ignored. 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 Company Ownership

Our data indicates that Private Companies hold 3.5%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Burford Capital better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can find 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.