Key Insights

• Significantly high institutional ownership implies Shore Bancshares' stock price is sensitive to their trading actions
• A total of 22 investors have a majority stake in the company with 50% ownership
• Insiders have bought recently

Every investor in Shore Bancshares, Inc. (NASDAQ:SHBI) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 45% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And things are looking up for institutional investors after the company gained US$73m in market cap last week. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 14%.

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

What Does The Institutional Ownership Tell Us About Shore Bancshares?

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.

As you can see, institutional investors have a fair amount of stake in Shore Bancshares. 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. 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 Shore Bancshares' historic earnings and revenue below, but keep in mind there's always more to the story.

Our data indicates that hedge funds own 9.6% of Shore Bancshares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. The company's largest shareholder is Fourthstone LLC, with ownership of 9.6%. Meanwhile, the second and third largest shareholders, hold 8.9% and 5.3%, of the shares outstanding, respectively. Alan Hyatt, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.

A closer look at our ownership figures suggests that the top 22 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Shore Bancshares

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.

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.

We can see that insiders own shares in Shore Bancshares, Inc.. In their own names, insiders own US$39m worth of stock in the US$422m 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

With a 36% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Shore Bancshares. 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:

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. Take risks for example - Shore Bancshares has 3 warning signs we think you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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