Yahoo Finance Institutional owners may consider drastic measures as Cleveland-Cliffs Inc.'s (NYSE:CLF) recent US$262m drop adds to long-term losses
Key Insights
Significantly high institutional ownership implies Cleveland-Cliffs' stock price is sensitive to their trading actions
A total of 25 investors have a majority stake in the company with 48% ownership
If you want to know who really controls Cleveland-Cliffs Inc. (NYSE:CLF), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 69% 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 3.4% last week. The recent loss, which adds to a one-year loss of 9.8% for stockholders, may not sit well with this group of investors. 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 Cleveland-Cliffs which might hurt individual investors.
Let's take a closer look to see what the different types of shareholders can tell us about Cleveland-Cliffs.
Check out our latest analysis for Cleveland-Cliffs
What Does The Institutional Ownership Tell Us About Cleveland-Cliffs?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
Cleveland-Cliffs already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Cleveland-Cliffs, (below). Of course, keep in mind that there are other factors to consider, too.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in Cleveland-Cliffs. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 10% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 10% and 4.5%, of the shares outstanding, respectively. Furthermore, CEO C. Goncalves is the owner of 1.1% of the company's shares.
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.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. 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 Cleveland-Cliffs
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
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 most recent data indicates that insiders own some shares in Cleveland-Cliffs Inc.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around US$135m 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 if those insiders have been selling.
General Public Ownership
With a 29% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Cleveland-Cliffs. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should be aware of the 2 warning signs we've spotted with Cleveland-Cliffs .
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.
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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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
