The big shareholder groups in PepsiCo, Inc. (NASDAQ:PEP) have power over the company. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. Companies that have been privatized tend to have low insider ownership.
PepsiCo is a pretty big company. It has a market capitalization of US$243b. Normally institutions would own a significant portion of a company this size. Taking a look at our data on the ownership groups (below), it seems that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about PepsiCo.
What Does The Institutional Ownership Tell Us About PepsiCo?
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.
PepsiCo already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 PepsiCo's historic earnings and revenue below, but keep in mind there's always more to the story.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. PepsiCo is not owned by hedge funds. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 8.9% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.6% and 4.3%, of the shares outstanding, respectively.
On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.
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 PepsiCo
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.
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 information suggests that PepsiCo, Inc. insiders own under 1% of the company. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$320m of stock. In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.
General Public Ownership
With a 26% ownership, the general public, mostly comprising of individual investors, have some degree of sway over PepsiCo. 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.
It's always worth thinking about the different groups who own shares in a company. But to understand PepsiCo better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with PepsiCo .
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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.