Could The Starwood Property Trust, Inc. (NYSE:STWD) Ownership Structure Tell Us Something Useful?

By
Simply Wall St
Published
January 24, 2022
NYSE:STWD
Source: Shutterstock

Every investor in Starwood Property Trust, Inc. (NYSE:STWD) should be aware of the most powerful shareholder groups. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. Companies that used to be publicly owned tend to have lower insider ownership.

Starwood Property Trust has a market capitalization of US$7.4b, so it's too big to fly under the radar. We'd expect to see both institutions and retail investors owning a portion of the company. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. Let's delve deeper into each type of owner, to discover more about Starwood Property Trust.

See our latest analysis for Starwood Property Trust

ownership-breakdown
NYSE:STWD Ownership Breakdown January 24th 2022

What Does The Institutional Ownership Tell Us About Starwood Property Trust?

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 Starwood Property Trust 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 Starwood Property Trust's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NYSE:STWD Earnings and Revenue Growth January 24th 2022

Hedge funds don't have many shares in Starwood Property Trust. The Vanguard Group, Inc. is currently the company's largest shareholder with 8.0% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 6.2% and 3.5%, of the shares outstanding, respectively. Barry Sternlicht, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Starwood Property Trust

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. 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.

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.

Shareholders would probably be interested to learn that insiders own shares in Starwood Property Trust, 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$320m 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 52% of Starwood Property Trust. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Starwood Property Trust (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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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