American Electric Power Company, Inc. (NASDAQ:AEP) is favoured by institutional owners who hold 78% of the company

Key Insights

• Given the large stake in the stock by institutions, American Electric Power Company's stock price might be vulnerable to their trading decisions
• A total of 25 investors have a majority stake in the company with 50% ownership
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

If you want to know who really controls American Electric Power Company, Inc. (NASDAQ:AEP), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 78% to be precise, is institutions. 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. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.

Let's delve deeper into each type of owner of American Electric Power Company, beginning with the chart below.

Check out our latest analysis for American Electric Power Company

What Does The Institutional Ownership Tell Us About American Electric Power Company?

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 American Electric Power Company 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. 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 American Electric Power Company'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. American Electric Power Company is not owned by hedge funds. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 9.6%. For context, the second largest shareholder holds about 8.2% of the shares outstanding, followed by an ownership of 5.1% by the third-largest shareholder.

A closer look at our ownership figures suggests that the top 25 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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 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 American Electric Power Company

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

Our data suggests that insiders own under 1% of American Electric Power Company, Inc. in their own names. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$33m 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 22% ownership, the general public, mostly comprising of individual investors, have some degree of sway over American Electric Power Company. 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. For instance, we've identified 2 warning signs for American Electric Power Company (1 doesn't sit too well with us) that 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.