With 56% institutional ownership, Telefonaktiebolaget LM Ericsson (publ) (STO:ERIC B) is a favorite amongst the big guns

Key Insights

• Significantly high institutional ownership implies Telefonaktiebolaget LM Ericsson's stock price is sensitive to their trading actions
• The top 16 shareholders own 50% of the company
• Insiders have been buying lately

To get a sense of who is truly in control of Telefonaktiebolaget LM Ericsson (publ) (STO:ERIC B), 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 56% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.

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

See our latest analysis for Telefonaktiebolaget LM Ericsson

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

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.

We can see that Telefonaktiebolaget LM Ericsson does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Telefonaktiebolaget LM Ericsson, (below). Of course, keep in mind that there are other factors to consider, too.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Telefonaktiebolaget LM Ericsson is not owned by hedge funds. Investor AB (publ) is currently the largest shareholder, with 8.8% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 6.3% and 5.0%, of the shares outstanding, respectively.

After doing some more digging, we found that the top 16 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Telefonaktiebolaget LM Ericsson

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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 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 kr1.4b worth of shares (at current prices). In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 35% 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.

Private Equity Ownership

With a stake of 8.8%, private equity firms could influence the Telefonaktiebolaget LM Ericsson board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Telefonaktiebolaget LM Ericsson better, we need to consider many other factors. Take risks for example - Telefonaktiebolaget LM Ericsson 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.