Institutions' substantial holdings in Fortescue implies that they have significant influence over the company's share price
The top 4 shareholders own 52% of the company
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
To get a sense of who is truly in control of Fortescue Ltd (ASX:FMG), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 52% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
And so it follows that institutional investors was the group most impacted after the company's market cap fell to AU$53b last week after a 6.2% drop in the share price. The recent loss, which adds to a one-year loss of 6.6% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell Fortescue which might hurt individual investors.
Let's delve deeper into each type of owner of Fortescue, beginning with the chart below.
What Does The Institutional Ownership Tell Us About Fortescue?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
Fortescue 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 Fortescue's earnings history below. Of course, the future is what really matters.
ASX:FMG Earnings and Revenue Growth August 19th 2024
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Fortescue. Tattarang Pty Ltd is currently the company's largest shareholder with 35% of shares outstanding. In comparison, the second and third largest shareholders hold about 8.8% and 5.0% of the stock.
On looking further, we found that 52% 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 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 are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Fortescue
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. 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.
Our most recent data indicates that insiders own some shares in Fortescue Ltd. The insiders have a meaningful stake worth AU$948m. we sometimes take an interest in whether they have been buying or selling.
General Public Ownership
The general public, who are usually individual investors, hold a 35% stake in Fortescue. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Company Ownership
We can see that Private Companies own 12%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
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.
