Institutional investors in The a2 Milk Company Limited (NZSE:ATM) see NZ$159m decrease in market cap last week, although long-term gains have benefitted them.
Significantly high institutional ownership implies a2 Milk's stock price is sensitive to their trading actions
A total of 16 investors have a majority stake in the company with 50% ownership
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
Every investor in The a2 Milk Company Limited (NZSE:ATM) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 53% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Institutional investors endured the highest losses after the company's market cap fell by NZ$159m last week. However, the 52% one-year return to shareholders may have helped lessen their pain. We would assume however, that they would be on the lookout for weakness in the future.
Let's delve deeper into each type of owner of a2 Milk, beginning with the chart below.
What Does The Institutional Ownership Tell Us About a2 Milk?
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.
We can see that a2 Milk 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 a2 Milk's historic earnings and revenue below, but keep in mind there's always more to the story.
NZSE:ATM Earnings and Revenue Growth October 23rd 2024
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in a2 Milk. The company's largest shareholder is Perpetual Limited, with ownership of 6.5%. In comparison, the second and third largest shareholders hold about 5.5% and 5.5% of the stock.
A closer look at our ownership figures suggests that the top 16 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of a2 Milk
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.
Our information suggests that The a2 Milk Company Limited insiders own under 1% of the company. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around NZ$13m worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
The general public-- including retail investors -- own 47% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for a2 Milk you should know about.
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.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
