Painful week for retail investors invested in Magellan Financial Group Limited (ASX:MFG) after 4.8% drop, institutions also suffered losses

Key Insights

• Significant control over Magellan Financial Group by retail investors implies that the general public has more power to influence management and governance-related decisions
• A total of 25 investors have a majority stake in the company with 44% ownership
• Recent purchases by insiders

If you want to know who really controls Magellan Financial Group Limited (ASX:MFG), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are retail investors with 55% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While institutions, who own 40% shares weren’t spared from last week’s AU$81m market cap drop, retail investors as a group suffered the maximum losses

Let's take a closer look to see what the different types of shareholders can tell us about Magellan Financial Group.

Check out our latest analysis for Magellan Financial Group

What Does The Institutional Ownership Tell Us About Magellan Financial 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 Magellan Financial Group 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. 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 Magellan Financial Group's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Magellan Financial Group. BlackRock, Inc. is currently the largest shareholder, with 6.1% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.0% and 4.9%, of the shares outstanding, respectively.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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 Magellan Financial Group

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

We can report that insiders do own shares in Magellan Financial Group Limited. This is a big company, so it is good to see this level of alignment. Insiders own AU$53m worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, mostly comprising of individual investors, collectively holds 55% of Magellan Financial Group shares. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

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. Be aware that Magellan Financial Group is showing 2 warning signs in our investment analysis , and 1 of those is significant...

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.