Great week for Mercer International Inc. (NASDAQ:MERC) institutional investors after losing 6.0% over the previous year

Key Insights

• Given the large stake in the stock by institutions, Mercer International's stock price might be vulnerable to their trading decisions
• A total of 7 investors have a majority stake in the company with 51% ownership
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

Every investor in Mercer International Inc. (NASDAQ:MERC) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 73% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Institutional investors would probably welcome last week's 18% increase in the share price after a year of 6.0% losses as a sign that returns may to begin trending higher.

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

View our latest analysis for Mercer International

What Does The Institutional Ownership Tell Us About Mercer International?

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 Mercer International 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Mercer International, (below). Of course, keep in mind that there are other factors to consider, too.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. It looks like hedge funds own 6.3% of Mercer International shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. IAT Reinsurance Company Ltd, Asset Management Arm is currently the company's largest shareholder with 25% of shares outstanding. In comparison, the second and third largest shareholders hold about 6.3% and 5.2% of the stock.

On further inspection, we found that more than half the company's shares are owned by the top 7 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. 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 Mercer International

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

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own some shares in Mercer International Inc.. It has a market capitalization of just US$514m, and insiders have US$22m worth of shares, in their own names. 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 16% stake in Mercer International. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Mercer International has 3 warning signs we think 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.