With 74% ownership of the shares, T. Rowe Price Group, Inc. (NASDAQ:TROW) is heavily dominated by institutional owners

By
Simply Wall St
Published
December 02, 2021
NasdaqGS:TROW
Source: Shutterstock

To get a sense of who is truly in control of T. Rowe Price Group, Inc. (NASDAQ:TROW), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 74% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

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. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.

Let's take a closer look to see what the different types of shareholders can tell us about T. Rowe Price Group.

View our latest analysis for T. Rowe Price Group

ownership-breakdown
NasdaqGS:TROW Ownership Breakdown December 3rd 2021

What Does The Institutional Ownership Tell Us About T. Rowe Price Group?

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.

As you can see, institutional investors have a fair amount of stake in T. Rowe Price Group. 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 T. Rowe Price Group, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NasdaqGS:TROW Earnings and Revenue Growth December 3rd 2021

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in T. Rowe Price Group. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 8.8%. In comparison, the second and third largest shareholders hold about 8.3% and 5.3% of the stock.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant 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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of T. Rowe Price Group

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

Shareholders would probably be interested to learn that insiders own shares in T. Rowe Price Group, Inc.. Insiders own US$481m worth of shares (at current prices). It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 24% 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.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

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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