Institutional investors have a lot riding on TransAlta Corporation (TSE:TA) with 67% ownership

Key Insights

• Given the large stake in the stock by institutions, TransAlta's stock price might be vulnerable to their trading decisions
• A total of 18 investors have a majority stake in the company with 51% ownership
• Recent purchases by insiders

Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.

A look at the shareholders of TransAlta Corporation (TSE:TA) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 67% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And things are looking up for institutional investors after the company gained CA$116m in market cap last week. One-year return to shareholders is currently 45% and last week’s gain was the icing on the cake.

In the chart below, we zoom in on the different ownership groups of TransAlta.

View our latest analysis for TransAlta

What Does The Institutional Ownership Tell Us About TransAlta?

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 TransAlta does have institutional investors; and they hold a good portion of the company's stock. 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 TransAlta'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. Our data indicates that hedge funds own 5.1% of TransAlta. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Our data shows that Brookfield Corporation is the largest shareholder with 9.0% of shares outstanding. RBC Global Asset Management Inc. is the second largest shareholder owning 7.8% of common stock, and Millennium Management LLC holds about 5.1% of the company stock.

After doing some more digging, we found that the top 18 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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

Insider Ownership Of TransAlta

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. 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 data suggests that insiders own under 1% of TransAlta Corporation in their own names. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own CA$16m worth of shares. 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-- including retail investors -- own 27% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

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. Take risks for example - TransAlta has 4 warning signs (and 2 which shouldn't be ignored) we think 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.