Painful week for private equity firms invested in MultiPlan Corporation (NYSE:MPLN) after 29% drop, institutions also suffered losses

Key Insights

• The considerable ownership by private equity firms in MultiPlan indicates that they collectively have a greater say in management and business strategy
• 54% of the business is held by the top 4 shareholders
• Recent purchases by insiders

To get a sense of who is truly in control of MultiPlan Corporation (NYSE:MPLN), it is important to understand the ownership structure of the business. We can see that private equity firms own the lion's share in the company with 46% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While institutions, who own 31% shares weren’t spared from last week’s US$95m market cap drop, private equity firms as a group suffered the maximum losses

Let's delve deeper into each type of owner of MultiPlan, beginning with the chart below.

See our latest analysis for MultiPlan

What Does The Institutional Ownership Tell Us About MultiPlan?

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.

As you can see, institutional investors have a fair amount of stake in MultiPlan. 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 MultiPlan's earnings history below. Of course, the future is what really matters.

MultiPlan is not owned by hedge funds. Hellman & Friedman LLC is currently the company's largest shareholder with 33% of shares outstanding. With 7.8% and 7.5% of the shares outstanding respectively, Public Investment Fund and GIC Special Investments Pte. Ltd. are the second and third largest shareholders.

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.

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

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

We can see that insiders own shares in MultiPlan Corporation. In their own names, insiders own US$11m worth of stock in the US$221m 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 9.9% stake in MultiPlan, which represents a relatively small class of owners. We'd generally expect to see a higher level of ownership by the general public, than this. It's not too concerning, but it is worth noting that retail investors might struggle to influence board decisions.

Private Equity Ownership

Private equity firms hold a 46% stake in MultiPlan. This suggests they can be influential in key policy decisions. 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 instance, we've identified 2 warning signs for MultiPlan (1 is a bit unpleasant) that you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com