Institutional investors may adopt severe steps after Information Services Group, Inc.'s (NASDAQ:III) latest 10% drop adds to a year losses

Key Insights

• Given the large stake in the stock by institutions, Information Services Group's stock price might be vulnerable to their trading decisions
• The top 6 shareholders own 51% of the company
• Insider ownership in Information Services Group is 16%

A look at the shareholders of Information Services Group, Inc. (NASDAQ:III) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 62% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$145m last week after a 10% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 39% might not go down well especially with this category of shareholders. 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 downtrend continues, institutions may face pressures to sell Information Services Group, which might have negative implications on individual investors.

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

View our latest analysis for Information Services Group

What Does The Institutional Ownership Tell Us About Information Services Group?

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.

Information Services Group already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Information Services Group's earnings history below. Of course, the future is what really matters.

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 Information Services Group. Our data shows that Chevrillon & Associés is the largest shareholder with 12% of shares outstanding. With 10% and 9.9% of the shares outstanding respectively, Private Capital Management, LLC and Michael Connors are the second and third largest shareholders. Michael Connors, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.

We did some more digging and found that 6 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Information Services Group

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.

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 information suggests that insiders maintain a significant holding in Information Services Group, Inc.. It has a market capitalization of just US$145m, and insiders have US$23m worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 11% stake in Information Services Group. 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 12%, private equity firms could influence the Information Services Group board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Information Services Group better, we need to consider many other factors. Take risks for example - Information Services Group has 2 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.