Given the large stake in the stock by institutions, Flagstar Financial's stock price might be vulnerable to their trading decisions
53% of the business is held by the top 5 shareholders
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
Every investor in Flagstar Financial, Inc. (NYSE:FLG) should be aware of the most powerful shareholder groups. With 47% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
And institutional investors endured the highest losses after the company's share price fell by 4.8% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 61% might not go down well especially with this category of shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in Flagstar Financial'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 Flagstar Financial.
What Does The Institutional Ownership Tell Us About Flagstar Financial?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
Flagstar Financial already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Flagstar Financial's historic earnings and revenue below, but keep in mind there's always more to the story.
NYSE:FLG Earnings and Revenue Growth December 6th 2024
It looks like hedge funds own 10% of Flagstar Financial 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. The company's largest shareholder is Liberty 77 Capital L.P., with ownership of 18%. Hudson Bay Capital Management LP is the second largest shareholder owning 10% of common stock, and BlackRock, Inc. holds about 9.3% of the company stock.
Our research also brought to light the fact that roughly 53% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Flagstar Financial
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
Our data suggests that insiders own under 1% of Flagstar Financial, Inc. in their own names. Keep in mind that it's a big company, and the insiders own US$46m worth of shares. The absolute value might be more important than the proportional share. It is always good to see at least some insider ownership, 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 Flagstar Financial. 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 Equity Ownership
With a stake of 26%, private equity firms could influence the Flagstar Financial 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.
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.
