In the wake of Invesco Mortgage Capital Inc.’s (NYSE:IVR) latest US$52m market cap drop, institutional owners may be forced to take severe actions

A look at the shareholders of Invesco Mortgage Capital Inc. (NYSE:IVR) can tell us which group is most powerful. We can see that institutions own the lion’s share in the company with 57% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And institutional investors saw their holdings value drop by 10% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 49% for shareholders. Also referred to as “smart money”, institutions have a lot of sway over how a stock’s price moves. As a result, if the downtrend continues, institutions may face pressures to sell Invesco Mortgage Capital, which might have negative implications on individual investors.

In the chart below, we zoom in on the different ownership groups of Invesco Mortgage Capital.

If you’re not interested in researching IVR’s ownership structure, we have a free list of interesting investing ideas to potentially inspire your next investment!

ownership-breakdown
NYSE:IVR Ownership Breakdown September 24th 2022

What Does The Institutional Ownership Tell Us About Invesco Mortgage Capital?

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.

We can see that Invesco Mortgage Capital does have institutional investors; and they hold a good portion of the company’s stock. 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. 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 Invesco Mortgage Capital, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NYSE:IVR Earnings and Revenue Growth September 24th 2022

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don’t have many shares in Invesco Mortgage Capital. The company’s largest shareholder is BlackRock, Inc., with ownership of 18%. With 10% and 3.9% of the shares outstanding respectively, The Vanguard Group, Inc. and State Street Global Advisors, Inc. are the second and third largest shareholders.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 20 shareholders, meaning that no single shareholder has a majority interest in the ownership.

Researching institutional ownership is a good way to gauge and filter a stock’s expected performance. The same can be achieved by studying analyst sentiments. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Invesco Mortgage Capital

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our information suggests that Invesco Mortgage Capital Inc. insiders own under 1% of the company. It appears that the board holds about US$1.3m worth of stock. This compares to a market capitalization of US$445m. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.

General Public Ownership

The general public– including retail investors — own 42% stake in the company, and hence can’t easily be ignored. 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. Consider for instance, the ever-present spectre of investment risk. We’ve identified 4 warning signs with Invesco Mortgage Capital (at least 2 which are a bit unpleasant) , and understanding them should be part of your investment process.

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.

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.

Valuation is complex, but we’re helping make it simple.

Find out whether Invesco Mortgage Capital is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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