MultiPlan Corporation (NYSE:MPLN) surges 23%; private equity firms who own 41% shares profited along with institutions

Key Insights

• MultiPlan's significant private equity firms ownership suggests that the key decisions are influenced by shareholders from the larger public
• The top 4 shareholders own 54% of the company
• Insiders have bought recently

Every investor in MultiPlan Corporation (NYSE:MPLN) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are private equity firms with 41% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Private equity firms gained the most after market cap touched US$267m last week, while institutions who own 27% also benefitted.

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

Check out our latest analysis for MultiPlan

What Does The Institutional Ownership Tell Us About MultiPlan?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that MultiPlan does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 MultiPlan's historic earnings and revenue below, but keep in mind there's always more to the story.

Our data indicates that hedge funds own 5.5% of MultiPlan. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Hellman & Friedman LLC is currently the largest shareholder, with 33% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.9% and 7.7% of the stock.

Our research also brought to light the fact that roughly 54% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

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 is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of MultiPlan

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

Our most recent data indicates that insiders own some shares in MultiPlan Corporation. As individuals, the insiders collectively own US$16m worth of the US$267m company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 13% stake in MultiPlan. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With a stake of 41%, private equity firms could influence the MultiPlan board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand MultiPlan better, we need to consider many other factors. For example, we've discovered 2 warning signs for MultiPlan (1 is a bit concerning!) that you should be aware of before investing here.

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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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.