Institutional owners may consider drastic measures as Atlas Arteria Limited's (ASX:ALX) recent AU$711m drop adds to long-term losses

Key Insights

• Institutions' substantial holdings in Atlas Arteria implies that they have significant influence over the company's share price
• 52% of the business is held by the top 5 shareholders
• Insiders have been buying lately

A look at the shareholders of Atlas Arteria Limited (ASX:ALX) can tell us which group is most powerful. The group holding the most number of shares in the company, around 76% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to AU$7.1b last week after a 9.1% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 15% might not go down well especially with this category of shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. Hence, if weakness in Atlas Arteria's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

Let's delve deeper into each type of owner of Atlas Arteria, beginning with the chart below.

Check out our latest analysis for Atlas Arteria

What Does The Institutional Ownership Tell Us About Atlas Arteria?

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.

Atlas Arteria already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Atlas Arteria's earnings history below. Of course, the future is what really matters.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Atlas Arteria is not owned by hedge funds. IFM Investors Pty Ltd is currently the company's largest shareholder with 27% of shares outstanding. With 9.2% and 5.5% of the shares outstanding respectively, Lazard Asset Management LLC and State Street Global Advisors, Inc. are the second and third largest shareholders.

On looking further, we found that 52% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Atlas Arteria

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

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 Atlas Arteria Limited in their own names. Keep in mind that it's a big company, and the insiders own AU$5.5m worth of shares. The absolute value might be more important than the proportional share. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 23% stake in Atlas Arteria. 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 Atlas Arteria better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Atlas Arteria 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com