Mercury NZ Limited's (NZSE:MCY) last week's 4.3% decline must have disappointed sovereign wealth funds who have a significant stake

Key Insights

• The considerable ownership by sovereign wealth funds in Mercury NZ indicates that they collectively have a greater say in management and business strategy
• The largest shareholder of the company is New Zealand Superannuation Fund with a 51% stake
• 11% of Mercury NZ is held by Institutions

To get a sense of who is truly in control of Mercury NZ Limited (NZSE:MCY), it is important to understand the ownership structure of the business. We can see that sovereign wealth funds own the lion's share in the company with 51% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And following last week's 4.3% decline in share price, sovereign wealth funds suffered the most losses.

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

See our latest analysis for Mercury NZ

What Does The Institutional Ownership Tell Us About Mercury NZ?

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 Mercury NZ 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 Mercury NZ's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Mercury NZ. New Zealand Superannuation Fund is currently the company's largest shareholder with 51% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. For context, the second largest shareholder holds about 2.0% of the shares outstanding, followed by an ownership of 1.5% by the third-largest shareholder.

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 Mercury NZ

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. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our information suggests that Mercury NZ Limited insiders own under 1% of the company. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own NZ$3.7m 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, who are usually individual investors, hold a 38% stake in Mercury NZ. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Mercury NZ has 1 warning sign we think you should be aware of.

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.