Given the large stake in the stock by institutions, LANXESS' stock price might be vulnerable to their trading decisions
50% of the business is held by the top 11 shareholders
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
If you want to know who really controls LANXESS Aktiengesellschaft (ETR:LXS), 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 62% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Given the vast amount of money and research capacities at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.
Let's take a closer look to see what the different types of shareholders can tell us about LANXESS.
What Does The Institutional Ownership Tell Us About LANXESS?
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.
We can see that LANXESS does have institutional investors; and they hold a good portion of the company's stock. 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 LANXESS' historic earnings and revenue below, but keep in mind there's always more to the story.
XTRA:LXS Earnings and Revenue Growth March 25th 2024
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. It looks like hedge funds own 5.3% of LANXESS shares. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Our data shows that Capital Research and Management Company is the largest shareholder with 9.7% of shares outstanding. With 6.0% and 5.3% of the shares outstanding respectively, Merrill Lynch & Co. Inc., Banking Investments and Sachem Head Capital Management LP are the second and third largest shareholders.
Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 11 shareholders, meaning that no single shareholder has a majority interest in the ownership.
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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of LANXESS
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.
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 LANXESS Aktiengesellschaft. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around €176m 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 21% ownership, the general public, mostly comprising of individual investors, have some degree of sway over LANXESS. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
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.
