Institutional owners may consider drastic measures as Mitek Systems, Inc.'s (NASDAQ:MITK) recent US$114m drop adds to long-term losses

Key Insights

• Given the large stake in the stock by institutions, Mitek Systems' stock price might be vulnerable to their trading decisions
• The top 14 shareholders own 51% of the company
• Insiders have been selling lately

If you want to know who really controls Mitek Systems, Inc. (NASDAQ:MITK), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 68% to be precise, is institutions. 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$538m last week after a 18% drop in the share price. The recent loss, which adds to a one-year loss of 5.7% 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 downtrend continues, institutions may face pressures to sell Mitek Systems, which might have negative implications on individual investors.

In the chart below, we zoom in on the different ownership groups of Mitek Systems.

Check out our latest analysis for Mitek Systems

What Does The Institutional Ownership Tell Us About Mitek Systems?

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.

We can see that Mitek Systems 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 Mitek Systems, (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 6.1% of Mitek Systems shares. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Our data shows that BlackRock, Inc. is the largest shareholder with 7.8% of shares outstanding. With 7.5% and 6.1% of the shares outstanding respectively, The Vanguard Group, Inc. and Blue Grotto Capital, LLC are the second and third largest shareholders.

After doing some more digging, we found that the top 14 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Mitek Systems

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

We can see that insiders own shares in Mitek Systems, Inc.. In their own names, insiders own US$13m worth of stock in the US$538m company. Some would say this shows alignment of interests between shareholders and the board. 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 24% stake in Mitek Systems. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 2 warning signs for Mitek Systems that you should be aware of.

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.

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