Yahoo Finance Institutional owners may consider drastic measures as Invesco Ltd.'s (NYSE:IVZ) recent US$283m drop adds to long-term losses
Key Insights
Given the large stake in the stock by institutions, Invesco's stock price might be vulnerable to their trading decisions
A total of 5 investors have a majority stake in the company with 53% ownership
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
If you want to know who really controls Invesco Ltd. (NYSE:IVZ), then you'll have to look at the makeup of its share registry. With 63% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$6.5b last week after a 4.1% drop in the share price. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 8.5% for shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in Invesco's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.
In the chart below, we zoom in on the different ownership groups of Invesco.
See our latest analysis for Invesco
What Does The Institutional Ownership Tell Us About Invesco?
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.
As you can see, institutional investors have a fair amount of stake in Invesco. 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Invesco's historic earnings and revenue below, but keep in mind there's always more to the story.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Our data indicates that hedge funds own 6.1% of Invesco. 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 Massachusetts Mutual Life Insurance Company is the largest shareholder with 18% of shares outstanding. For context, the second largest shareholder holds about 12% of the shares outstanding, followed by an ownership of 11% by the third-largest shareholder.
On looking further, we found that 53% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of 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 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 Invesco
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 Invesco Ltd.. This is a big company, so it is good to see this level of alignment. Insiders own US$107m worth of shares (at current prices). 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 11% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Invesco. 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.
Private Company Ownership
It seems that Private Companies own 18%, of the Invesco stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
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 1 warning sign for Invesco that 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
