Every investor in Metro Bank PLC (LON:MTRO) should be aware of the most powerful shareholder groups. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of smaller companies. Warren Buffett said that he likes ‘a business with enduring competitive advantages that is run by able and owner-oriented people’. So it’s nice to see some insider ownership, because it may suggest that management is owner-oriented.
With a market capitalization of UK£523m, Metro Bank is a small cap stock, so it might not be well known by many institutional investors. In the chart below below, we can see that institutional investors have bought into the company. Let’s take a closer look to see what the different types of shareholder can tell us about MTRO.
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LSE:MTRO Ownership Summary, May 17th 2019
What Does The Institutional Ownership Tell Us About Metro Bank?
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.
As you can see, institutional investors own 40% of Metro Bank. 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 Metro Bank’s earnings history, below. Of course, the future is what really matters.
LSE:MTRO Income Statement, May 17th 2019
It would appear that 11% of Metro Bank shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Metro Bank
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our most recent data indicates that insiders own some shares in Metro Bank PLC. It has a market capitalization of just UK£523m, and insiders have UK£31m worth of shares, in their own names. 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
With a 31% ownership, the general public have some degree of sway over MTRO. 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 an ownership of 10.0%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and — as the name suggests — don’t invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.
Next Steps:
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too.
I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.