GrainCorp Limited's (ASX:GNC) institutional investors lost 4.5% last week but have benefitted from longer-term gains

Key Insights

• Given the large stake in the stock by institutions, GrainCorp's stock price might be vulnerable to their trading decisions
• The top 11 shareholders own 50% of the company
• Insiders have been buying lately

To get a sense of who is truly in control of GrainCorp Limited (ASX:GNC), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 53% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors was the group most impacted after the company's market cap fell to AU$1.8b last week. However, the 24% one-year return to shareholders may have helped lessen their pain. But they would probably be wary of future losses.

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

View our latest analysis for GrainCorp

What Does The Institutional Ownership Tell Us About GrainCorp?

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.

We can see that GrainCorp does have institutional investors; and they hold a good portion of the company's stock. 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 GrainCorp, (below). Of course, keep in mind that there are other factors to consider, too.

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 GrainCorp. State Street Global Advisors, Inc. is currently the largest shareholder, with 7.5% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 6.1% and 6.1%, of the shares outstanding, respectively.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 11 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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 GrainCorp

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

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 GrainCorp Limited. Keep in mind that it's a big company, and the insiders own AU$15m worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 41% stake in the company, and hence can't easily be ignored. 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.

Public Company Ownership

It appears to us that public companies own 5.0% of GrainCorp. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand GrainCorp better, we need to consider many other factors. For instance, we've identified 3 warning signs for GrainCorp (1 is a bit unpleasant) that you should be aware of.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.