Telefonaktiebolaget LM Ericsson (publ) (STO:ERIC B) is a favorite amongst institutional investors who own 59%

A look at the shareholders of Telefonaktiebolaget LM Ericsson (publ) (STO:ERIC B) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 59% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.

In the chart below, we zoom in on the different ownership groups of Telefonaktiebolaget LM Ericsson.

Our analysis indicates that ERIC B is potentially undervalued!

What Does The Institutional Ownership Tell Us About Telefonaktiebolaget LM Ericsson?

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.

We can see that Telefonaktiebolaget LM Ericsson does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Telefonaktiebolaget LM Ericsson'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 Telefonaktiebolaget LM Ericsson. Our data shows that Investor AB (publ) is the largest shareholder with 8.0% of shares outstanding. PRIMECAP Management Company is the second largest shareholder owning 5.6% of common stock, and Cevian Capital AB holds about 4.6% of the company stock.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 22 shareholders, meaning that no single shareholder has a majority interest in the ownership.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Telefonaktiebolaget LM Ericsson

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.

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 Telefonaktiebolaget LM Ericsson (publ) in their own names. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own kr174m worth of shares (at current prices). 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 33% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Equity Ownership

With a stake of 8.0%, private equity firms could influence the Telefonaktiebolaget LM Ericsson board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 1 warning sign for Telefonaktiebolaget LM Ericsson that you should be aware of before investing here.

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.