A look at the shareholders of Fortescue Metals Group Limited (ASX:FMG) can tell us which group is most powerful. With 56% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
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 delve deeper into each type of owner of Fortescue Metals Group, beginning with the chart below.
What Does The Institutional Ownership Tell Us About Fortescue Metals Group?
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.
Fortescue Metals Group already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Fortescue Metals Group, (below). Of course, keep in mind that there are other factors to consider, too.
ASX:FMG Earnings and Revenue Growth January 18th 2023
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 Metals Group. The company's largest shareholder is Tattarang Pty Ltd, with ownership of 36%. For context, the second largest shareholder holds about 8.8% of the shares outstanding, followed by an ownership of 7.7% by the third-largest shareholder.
To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Fortescue Metals Group
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 most recent data indicates that insiders own less than 1% of Fortescue Metals Group Limited. However, it's possible that insiders might have an indirect interest through a more complex structure. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own AU$255m of stock. Arguably recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.
General Public Ownership
The general public-- including retail investors -- own 32% 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.
Private Company Ownership
Our data indicates that Private Companies hold 12%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Fortescue Metals Group better, we need to consider many other factors. For example, we've discovered 2 warning signs for Fortescue Metals Group (1 can't be ignored!) 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.
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