Institutional owners may consider drastic measures as Invesco Ltd.’s recent $283 million drop. (NYSE:IVZ) adds to long-term losses.

Key ideas

• Given institutions’ large stake in the stock, Invesco’s stock price could be vulnerable to their trading decisions.

• A total of 5 investors hold a majority stake in the company with a 53% stake.

• By using analyst forecast data as well as ownership research, one can better assess a company’s future performance.

If you want to know who really controls Invesco Ltd. (NYSE: IVZ), you will then need to examine the composition of its share register. With 63% of the capital, institutions own the maximum share in the company. In other words, the group will benefit the most if the stock rises (or lose the most if the stock goes down).

It follows that institutional investors were the worst-hit group after the company’s market capitalization fell to $6.5 billion last week following a 4.1% drop in the stock price. This set of investors may be particularly concerned about the current loss, which adds to a year-over-year loss of 8.5% for shareholders. Often referred to as “market participants,” institutions wield significant power to influence the price dynamics of any stock. Therefore, if Invesco’s stock price weakness persists, institutional investors may feel pressured to sell the stock, which may not be ideal for individual investors.

In the chart below, we zoom in on Invesco’s different ownership groups.

See our latest analysis for Invesco

What does 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 is included in a major index. We expect most companies to have some institutions on the register, especially if they are growing.

As you can see, institutional investors have a significant stake in Invesco. This implies that analysts working for these institutions have looked at the stock and like it. But like everyone else, they can be wrong. When multiple institutions own a stock, there is always a risk that they may find themselves in a ‘crowded trade’. When such a trade goes bad, multiple parties may compete to sell their shares quickly. 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 that there’s always more to the story.

Investors should note that institutions actually own more than half the company, allowing them to collectively wield significant power. Our data indicates that hedge funds own 6.1% of Invesco. This is interesting, because hedge funds can be very active and activist. Many look for medium-term catalysts that will drive the stock price higher. Our data shows that Massachusetts Mutual Life Insurance Company is the largest shareholder with 18% of shares outstanding. As a reminder, the second largest shareholder owns approximately 12% of the outstanding shares, followed by an 11% stake by the third largest shareholder.

The story continues

Looking further, we found that 53% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a say in the company’s decisions.

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 helpful to know their overall view of the future.

Invesco Insider Ownership

The definition of an insider may differ slightly between countries, but board members still count. Company management runs the business, but the CEO will answer to the board of directors, even if he or she is a member of it.

Most view insider ownership as positive because it can indicate that the board is well aligned with other shareholders. However, sometimes too much power is concentrated within this group.

We can see that insiders own shares in Invesco Ltd.. It’s a large company, so it’s 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 to see if these insiders have been selling.

General public property

With an 11% stake, the general public, consisting mainly of individual investors, has some influence over Invesco. This size of ownership, although considerable, may not be enough to change company policy if the decision is not in line with that of other large shareholders.

Private company ownership

It appears that private companies own 18% of Invesco shares. Private companies can be related parties. Sometimes insiders have an interest in a public company through a stake in a private company, rather than in their own capacity as an individual. Although it is difficult to draw general conclusions, it is worth noting as an area for further research.

Next steps:

While it’s worth considering the different groups that own a business, there are other factors that are even more important. For example, we identified 1 warning sign for Invesco which you should be aware of.

If you’d rather find out what analysts are predicting in terms of future growth, don’t miss this free analyst forecast report.

NB: The figures in this article are calculated using data for the last twelve months, which refers to the 12 month period ending on the last day of the month in which the financial statements are dated. This may not be consistent with the annual report figures for the entire year.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to constitute financial advice. It does not constitute a recommendation to buy or sell shares and does not take into account your objectives or your financial situation. Our goal is to provide you with targeted, long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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