Key Insights

• Given the large stake in the stock by institutions, Ready Capital's stock price might be vulnerable to their trading decisions
• The top 25 shareholders own 50% of the company

Every investor in Ready Capital Corporation (NYSE:RC) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 51% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutional investors saw their holdings value drop by 11% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 67% 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. As a result, if the decline continues, institutional investors may be pressured to sell Ready Capital which might hurt individual investors.

Let's take a closer look to see what the different types of shareholders can tell us about Ready Capital.

What Does The Institutional Ownership Tell Us About Ready Capital?

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.

We can see that Ready 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. 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 Ready Capital's historic earnings and revenue below, but keep in mind there's always more to the story.

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 Ready Capital. Looking at our data, we can see that the largest shareholder is Howard Amster with 9.9% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 8.0% of common stock, and The Vanguard Group, Inc. holds about 5.3% of the company stock.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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. 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 Ready Capital

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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 insiders maintain a significant holding in Ready Capital Corporation. Insiders own US$37m worth of shares in the US$338m company. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 38% 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. Be aware that Ready Capital is showing 3 warning signs in our investment analysis , and 2 of those are a bit concerning...

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.