The big shareholder groups in Fortescue Metals Group Limited (ASX:FMG) have power over the company. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Companies that used to be publicly owned tend to have lower insider ownership.
Fortescue Metals Group is a pretty big company. It has a market capitalization of AU$57b. Normally institutions would own a significant portion of a company this size. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. Let's delve deeper into each type of owner, to discover more about Fortescue Metals Group.
What Does The Institutional Ownership Tell Us About Fortescue Metals Group?
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 Fortescue Metals Group does have institutional investors; and they hold a good portion of the company's stock. 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. 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 August 26th 2020
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in Fortescue Metals Group. Our data shows that Tattarang Pty Ltd is the largest shareholder with 36% of shares outstanding. For context, the second largest shareholder holds about 10% of the shares outstanding, followed by an ownership of 4.9% by the third-largest shareholder.
After doing some more digging, we found that the top 3 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.
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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Fortescue Metals Group
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our data suggests that insiders own under 1% of Fortescue Metals Group Limited in their own names. But they may have an indirect interest through a corporate structure that we haven't picked up on. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own AU$186m 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
With a 30% ownership, the general public have some degree of sway over Fortescue Metals Group. 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
It seems that Private Companies own 3.5%, of the Fortescue Metals Group stock. 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.
Public Company Ownership
Public companies currently own 10% of Fortescue Metals Group stock. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.
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. For example, we've discovered 2 warning signs for Fortescue Metals Group (1 makes us a bit 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.
This article by Simply Wall St is general in nature. 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.
