With 54% ownership, The a2 Milk Company Limited (NZSE:ATM) boasts of strong institutional backing

Key Insights

• Given the large stake in the stock by institutions, a2 Milk's stock price might be vulnerable to their trading decisions
• A total of 16 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 The a2 Milk Company Limited (NZSE:ATM), 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 54% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Given the vast amount of money and research capacities at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.

Let's take a closer look to see what the different types of shareholders can tell us about a2 Milk.

See our latest analysis for a2 Milk

What Does The Institutional Ownership Tell Us About a2 Milk?

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.

a2 Milk already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 a2 Milk's earnings history below. Of course, the future is what really matters.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in a2 Milk. Looking at our data, we can see that the largest shareholder is Perpetual Limited with 6.7% of shares outstanding. With 5.5% and 5.0% of the shares outstanding respectively, BlackRock, Inc. and The Vanguard Group, Inc. are the second and third largest shareholders.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 16 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of a2 Milk

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.

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 The a2 Milk Company Limited in their own names. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around NZ$24m worth of shares (at current prices). 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 46% stake in the company, and hence can't easily be ignored. 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 a2 Milk better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for a2 Milk you should know about.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.