After losing 25% in the past year, LANXESS Aktiengesellschaft (ETR:LXS) institutional owners must be relieved by the recent gain

Key Insights

• Significantly high institutional ownership implies LANXESS' stock price is sensitive to their trading actions
• A total of 24 investors have a majority stake in the company with 50% ownership
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

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To get a sense of who is truly in control of LANXESS Aktiengesellschaft (ETR:LXS), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 47% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Last week's €93m market cap gain would probably be appreciated by institutional investors, especially after a year of 25% losses.

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

See our latest analysis for LANXESS

What Does The Institutional Ownership Tell Us About LANXESS?

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.

LANXESS already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of LANXESS, (below). Of course, keep in mind that there are other factors to consider, too.

It looks like hedge funds own 6.4% of LANXESS shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Greenlight Capital, Inc. is currently the largest shareholder, with 6.4% of shares outstanding. With 5.2% and 5.0% of the shares outstanding respectively, Barclays Bank PLC and Causeway Capital Management LLC are the second and third largest shareholders.

A closer look at our ownership figures suggests that the top 24 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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. 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 LANXESS

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Our most recent data indicates that insiders own some shares in LANXESS Aktiengesellschaft. This is a big company, so it is good to see this level of alignment. Insiders own €25m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 43% stake in LANXESS. 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 LANXESS better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with LANXESS .

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.