Institutions' substantial holdings in Contact Energy implies that they have significant influence over the company's share price
The top 9 shareholders own 50% of the company
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
A look at the shareholders of Contact Energy Limited (NZSE:CEN) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 58% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.
Let's take a closer look to see what the different types of shareholders can tell us about Contact Energy.
What Does The Institutional Ownership Tell Us About Contact Energy?
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.
Contact Energy already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Contact Energy's earnings history below. Of course, the future is what really matters.
NZSE:CEN Earnings and Revenue Growth April 23rd 2024
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in Contact Energy. Looking at our data, we can see that the largest shareholder is Orbis Investment Management Limited with 8.7% of shares outstanding. For context, the second largest shareholder holds about 7.9% of the shares outstanding, followed by an ownership of 7.6% by the third-largest shareholder.
We also observed that the top 9 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.
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 Contact Energy
The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 data suggests that insiders own under 1% of Contact Energy Limited in their own names. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own NZ$17m worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.
General Public Ownership
The general public-- including retail investors -- own 41% 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.
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.
