Institutional owners may take dramatic actions as Exxaro Resources Limited's (JSE:EXX) recent 5.9% drop adds to one-year losses

Key Insights

• Institutions' substantial holdings in Exxaro Resources implies that they have significant influence over the company's share price
• A total of 5 investors have a majority stake in the company with 51% ownership
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

A look at the shareholders of Exxaro Resources Limited (JSE:EXX) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 71% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, institutional investors endured the highest losses last week after market cap fell by R2.3b. The recent loss, which adds to a one-year loss of 4.0% for stockholders, may not sit well with this group of investors. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in Exxaro Resources' share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

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

View our latest analysis for Exxaro Resources

What Does The Institutional Ownership Tell Us About Exxaro Resources?

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 Exxaro Resources. 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 Exxaro Resources, (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. Exxaro Resources is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Public Investment Corporation Limited with 22% of shares outstanding. For context, the second largest shareholder holds about 12% of the shares outstanding, followed by an ownership of 9.3% by the third-largest shareholder.

Our research also brought to light the fact that roughly 51% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

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

Insider Ownership Of Exxaro Resources

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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 most recent data indicates that insiders own less than 1% of Exxaro Resources Limited. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around R33m worth of shares (at current prices). Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 29% 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Exxaro Resources better, we need to consider many other factors. For example, we've discovered 2 warning signs for Exxaro Resources (1 doesn't sit too well with us!) that you should be aware of before investing here.

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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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.