With 80% ownership of the shares, FirstEnergy Corp. (NYSE:FE) is heavily dominated by institutional owners

By
Simply Wall St
Published
February 17, 2022
NYSE:FE
Source: Shutterstock

A look at the shareholders of FirstEnergy Corp. (NYSE:FE) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 80% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

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.

Let's delve deeper into each type of owner of FirstEnergy, beginning with the chart below.

See our latest analysis for FirstEnergy

ownership-breakdown
NYSE:FE Ownership Breakdown February 17th 2022

What Does The Institutional Ownership Tell Us About FirstEnergy?

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.

FirstEnergy already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 FirstEnergy, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NYSE:FE Earnings and Revenue Growth February 17th 2022

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in FirstEnergy. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 11%. Meanwhile, the second and third largest shareholders, hold 7.6% and 7.1%, of the shares outstanding, respectively.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 13 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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. 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 FirstEnergy

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.

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 information suggests that FirstEnergy Corp. 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$45m of stock. 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

With a 15% ownership, the general public, mostly comprising of individual investors, have some degree of sway over FirstEnergy. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

Private equity firms hold a 5.1% stake in FirstEnergy. This suggests they can be influential in key policy decisions. 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 FirstEnergy better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with FirstEnergy (including 1 which makes us a bit uncomfortable) .

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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