Institutional shareholders may be less affected by TMX Group Limited's (TSE:X) pullback last week after a year of 1.6% returns

By
Simply Wall St
Published
February 21, 2022
TSX:X
Source: Shutterstock

If you want to know who really controls TMX Group Limited (TSE:X), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 53% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors endured the highest losses after the company's market cap fell by CA$461m last week. However, the 1.6% one-year return to shareholders might have softened the blow. They should, however, be mindful of further losses in the future.

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

See our latest analysis for TMX Group

ownership-breakdown
TSX:X Ownership Breakdown February 21st 2022

What Does The Institutional Ownership Tell Us About TMX Group?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that TMX Group does have institutional investors; and they hold a good portion of the company's stock. 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 TMX Group's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
TSX:X Earnings and Revenue Growth February 21st 2022

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in TMX Group. Mackenzie Financial Corporation is currently the company's largest shareholder with 5.7% of shares outstanding. Manulife Asset Management is the second largest shareholder owning 4.6% of common stock, and FMR LLC holds about 4.1% of the company stock.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of TMX Group

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.

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.

Shareholders would probably be interested to learn that insiders own shares in TMX Group Limited. The insiders have a meaningful stake worth CA$76m. 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

The general public-- including retail investors -- own 46% 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand TMX Group better, we need to consider many other factors. For example, we've discovered 1 warning sign for TMX Group that you should be aware of before investing here.

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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