Cleveland-Cliffs Inc.'s (NYSE:CLF) latest 3.0% decline adds to one-year losses, institutional investors may consider drastic measures

Key Insights

• Given the large stake in the stock by institutions, Cleveland-Cliffs' stock price might be vulnerable to their trading decisions
• The top 25 shareholders own 49% of the company
• Recent sales by insiders

To get a sense of who is truly in control of Cleveland-Cliffs Inc. (NYSE:CLF), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 68% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors endured the highest losses after the company's share price fell by 3.0% last week. The recent loss, which adds to a one-year loss of 42% for stockholders, may not sit well with this group of investors. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the decline continues, institutional investors may be pressured to sell Cleveland-Cliffs which might hurt individual investors.

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

View our latest analysis for Cleveland-Cliffs

What Does The Institutional Ownership Tell Us About Cleveland-Cliffs?

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.

Cleveland-Cliffs already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Cleveland-Cliffs, (below). Of course, keep in mind that there are other factors to consider, too.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in Cleveland-Cliffs. BlackRock, Inc. is currently the largest shareholder, with 10% of shares outstanding. For context, the second largest shareholder holds about 9.9% of the shares outstanding, followed by an ownership of 4.2% by the third-largest shareholder. Furthermore, CEO C. Goncalves is the owner of 1.1% of the company's shares.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Cleveland-Cliffs

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 Cleveland-Cliffs Inc.. The insiders have a meaningful stake worth US$101m. Most would see this as a real positive. Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

With a 30% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Cleveland-Cliffs. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Cleveland-Cliffs better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Cleveland-Cliffs .

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.