Retail investors who have a significant stake must be disappointed along with institutions after Incitec Pivot Limited's (ASX:IPL) market cap dropped by AU$301m

Key Insights

• Significant control over Incitec Pivot by retail investors implies that the general public has more power to influence management and governance-related decisions
• 50% of the business is held by the top 25 shareholders
• Recent purchases by insiders

Every investor in Incitec Pivot Limited (ASX:IPL) should be aware of the most powerful shareholder groups. We can see that retail investors own the lion's share in the company with 49% 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 37% came under pressure after market cap dropped to AU$5.6b last week,retail investors took the most losses.

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

See our latest analysis for Incitec Pivot

What Does The Institutional Ownership Tell Us About Incitec Pivot?

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.

Incitec Pivot already has institutions on the share registry. Indeed, they own a respectable stake in 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 Incitec Pivot's historic earnings and revenue below, but keep in mind there's always more to the story.

Our data indicates that hedge funds own 14% of Incitec Pivot. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Our data shows that Janchor Partners Limited is the largest shareholder with 8.4% of shares outstanding. The second and third largest shareholders are The Vanguard Group, Inc. and Orbis Investment Management Limited, with an equal amount of shares to their name at 6.4%.

A closer look at our ownership figures suggests that the top 25 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Incitec Pivot

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.

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 Incitec Pivot Limited in their own names. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around AU$5.5m 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 49% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Incitec Pivot. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Incitec Pivot better, we need to consider many other factors. Take risks for example - Incitec Pivot has 1 warning sign we think you should be aware of.

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.

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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.