The big shareholder groups in Fortescue Metals Group Limited (ASX:FMG) have power over the company. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of smaller companies. We also tend to see lower insider ownership in companies that were previously publicly owned.
With a market capitalization of AU$17b, Fortescue Metals Group is rather large. We’d expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. In the chart below below, we can see that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about FMG.
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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 58% of the company. 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. 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 Fortescue Metals Group’s historic earnings and revenue, below, but keep in mind there’s always more to the story.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Fortescue Metals Group is not owned by hedge funds. 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.
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.
Our most recent data indicates that insiders own less than 1% of Fortescue Metals Group Limited. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amount to less than 1%, we can see that board members collectively own AU$148m 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
The general public holds a 31% stake in FMG. 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.
Private Company Ownership
It seems that Private Companies own 10%, of the FMG stock. 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.
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.
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.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.