After a year of 5.3% returns, Technology One Limited's (ASX:TNE) share price drop last week may have less of an impact on institutional investors

Key Insights

• Given the large stake in the stock by institutions, Technology One's stock price might be vulnerable to their trading decisions
• A total of 18 investors have a majority stake in the company with 51% ownership
• Insiders own 12% of Technology One

To get a sense of who is truly in control of Technology One Limited (ASX:TNE), it is important to understand the ownership structure of the business. With 47% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Institutional investors was the group most impacted after the company's market cap fell to AU$5.2b last week. Still, the 5.3% one-year gains may have helped mitigate their overall losses. But they would probably be wary of future losses.

In the chart below, we zoom in on the different ownership groups of Technology One.

See our latest analysis for Technology One

What Does The Institutional Ownership Tell Us About Technology One?

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.

We can see that Technology One does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Technology One's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Technology One. The company's largest shareholder is John MacTaggart, with ownership of 7.6%. In comparison, the second and third largest shareholders hold about 5.4% and 4.7% of the stock.

After doing some more digging, we found that the top 18 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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 are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Technology One

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

It seems insiders own a significant proportion of Technology One Limited. It is very interesting to see that insiders have a meaningful AU$641m stake in this AU$5.2b business. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 41% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Technology One. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

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.