Key Insights

• MultiPlan's significant private equity firms ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 4 investors have a majority stake in the company with 55% ownership
• Recent purchases by insiders

To get a sense of who is truly in control of MultiPlan Corporation (NYSE:MPLN), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 47% to be precise, is private equity firms. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While private equity firms were the group that reaped the most benefits after last week's 73% price gain, institutions also received a 27% cut.

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

What Does The Institutional Ownership Tell Us About MultiPlan?

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.

MultiPlan already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at MultiPlan's earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in MultiPlan. Our data shows that Hellman & Friedman LLC is the largest shareholder with 33% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.9% and 7.7% of the stock.

On looking further, we found that 55% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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. 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 MultiPlan

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

We can report that insiders do own shares in MultiPlan Corporation. It has a market capitalization of just US$198m, and insiders have US$12m worth of shares, in their own names. Some would say this shows alignment of interests between shareholders and the board, though we generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 12% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Equity Ownership

With a stake of 47%, private equity firms could influence the MultiPlan board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand MultiPlan better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with MultiPlan (including 1 which is significant) .

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.