After losing 14% in the past year, Megaport Limited (ASX:MP1) institutional owners must be relieved by the recent gain

Key Insights

• Given the large stake in the stock by institutions, Megaport's stock price might be vulnerable to their trading decisions
• A total of 9 investors have a majority stake in the company with 51% ownership
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

Our free stock report includes 1 warning sign investors should be aware of before investing in Megaport. Read for free now.

A look at the shareholders of Megaport Limited (ASX:MP1) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 66% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors would appreciate the 10% increase in share price last week, given their one-year losses have totalled a disappointing 14%.

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

View our latest analysis for Megaport

What Does The Institutional Ownership Tell Us About Megaport?

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.

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

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Megaport. The company's largest shareholder is Australian Super Pty Ltd, with ownership of 9.3%. For context, the second largest shareholder holds about 7.9% of the shares outstanding, followed by an ownership of 6.4% by the third-largest shareholder.

We did some more digging and found that 9 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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

Insider Ownership Of Megaport

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.

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 some shares in Megaport Limited. The insiders have a meaningful stake worth AU$26m. Most would see this as a real positive. 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

With a 31% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Megaport. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Megaport better, we need to consider many other factors. Be aware that Megaport is showing 1 warning sign in our investment analysis , you should know about...

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.