Key Insights

• Institutions' substantial holdings in LendingClub implies that they have significant influence over the company's share price
• A total of 15 investors have a majority stake in the company with 51% ownership
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

Every investor in LendingClub Corporation (NYSE:LC) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 77% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 5.1% in value last week. However, the 11% one-year returns may have helped alleviate their overall losses. But they would probably be wary of future losses.

In the chart below, we zoom in on the different ownership groups of LendingClub.

What Does The Institutional Ownership Tell Us About LendingClub?

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 have a fair amount of stake in LendingClub. 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 LendingClub'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. LendingClub is not owned by hedge funds. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 10%. Meanwhile, the second and third largest shareholders, hold 7.5% and 6.2%, of the shares outstanding, respectively. In addition, we found that Scott Sanborn, the CEO has 1.3% of the shares allocated to their name.

A closer look at our ownership figures suggests that the top 15 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of LendingClub

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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.

Shareholders would probably be interested to learn that insiders own shares in LendingClub Corporation. As individuals, the insiders collectively own US$31m worth of the US$998m company. 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

The general public-- including retail investors -- own 20% 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 risks, for instance. Every company has them, and we've spotted 2 warning signs for LendingClub you should know about.

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.

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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.