A look at the shareholders of Brookfield Corporation (TSE:BN) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 74% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
And so it follows that institutional investors was the group most impacted after the company's market cap fell to CA$69b last week after a 9.3% drop in the share price. The recent loss, which adds to a one-year loss of 7.2% for stockholders, may not sit well with this group of investors. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. Hence, if weakness in Brookfield's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.
In the chart below, we zoom in on the different ownership groups of Brookfield.
What Does The Institutional Ownership Tell Us About Brookfield?
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.
Brookfield 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. 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 Brookfield's historic earnings and revenue below, but keep in mind there's always more to the story.
TSX:BN Earnings and Revenue Growth September 23rd 2023
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Brookfield. Brookfield Corporation is currently the largest shareholder, with 8.5% of shares outstanding. With 7.6% and 4.2% of the shares outstanding respectively, Brookfield Public Securities Group LLC and James Flatt are the second and third largest shareholders. James Flatt, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.
A closer look at our ownership figures suggests that the top 17 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. There is some analyst coverage of the stock, but it could still become more well known, with time.
Insider Ownership Of Brookfield
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.
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 insiders maintain a significant holding in Brookfield Corporation. Insiders own CA$7.8b worth of shares in the CA$69b company. That's quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.
General Public Ownership
The general public-- including retail investors -- own 15% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 4 warning signs for Brookfield (2 make us uncomfortable!) that you should be aware of before investing here.
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.
