Positive week for TransAlta Corporation (TSE:TA) institutional investors who lost 23% over the past year

Key Insights

• Institutions' substantial holdings in TransAlta implies that they have significant influence over the company's share price
• 50% of the business is held by the top 14 shareholders
• Recent purchases by insiders

If you want to know who really controls TransAlta Corporation (TSE:TA), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 63% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Institutional investors would appreciate the 6.6% increase in share price last week, given their one-year losses have totalled a disappointing 23%.

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

See 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.

As you can see, institutional investors have a fair amount of stake in TransAlta. 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. 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. TransAlta is not owned by hedge funds. RBC Global Asset Management Inc. is currently the largest shareholder, with 12% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 12% and 4.5%, of the shares outstanding, respectively.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 14 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of TransAlta

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 TransAlta Corporation in their own names. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. Keep in mind that it's a big company, and the insiders own CA$15m worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 33% 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.

Private Company Ownership

We can see that Private Companies own 3.6%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with TransAlta , and understanding them should be part of your investment process.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.