Institutional owners may consider drastic measures as The Children's Place, Inc.'s (NASDAQ:PLCE) recent US$23m drop adds to long-term losses

Key Insights

• Institutions' substantial holdings in Children's Place implies that they have significant influence over the company's share price
• The largest shareholder of the company is Mithaq Capital with a 55% stake
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

A look at the shareholders of The Children's Place, Inc. (NASDAQ:PLCE) can tell us which group is most powerful. The group holding the most number of shares in the company, around 83% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, institutional investors endured the highest losses last week after market cap fell by US$23m. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 27% might not go down well especially with this category of shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in Children's Place's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

Let's take a closer look to see what the different types of shareholders can tell us about Children's Place.

View our latest analysis for Children's Place

What Does The Institutional Ownership Tell Us About Children's Place?

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.

Children's Place already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Children's Place's earnings history below. Of course, the future is what really matters.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Children's Place is not owned by hedge funds. Mithaq Capital is currently the company's largest shareholder with 55% of shares outstanding. This implies that they have majority interest control of the future of the company. For context, the second largest shareholder holds about 3.1% of the shares outstanding, followed by an ownership of 2.9% by the third-largest shareholder.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Children's Place

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.

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.

Shareholders would probably be interested to learn that insiders own shares in The Children's Place, Inc.. As individuals, the insiders collectively own US$7.5m worth of the US$179m company. Some would say this shows alignment of interests between shareholders and the board, though we generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.

General Public Ownership

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

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Children's Place better, we need to consider many other factors. For example, we've discovered 4 warning signs for Children's Place that you should be aware of before investing here.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.