Yahoo Finance Royal Bank of Canada's (TSE:RY) market cap dropped CA$7.5b last week; individual investors who hold 53% were hit as were institutions
Key Insights
Royal Bank of Canada's significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
35% of the business is held by the top 25 shareholders
Every investor in Royal Bank of Canada (TSE:RY) should be aware of the most powerful shareholder groups. With 53% stake, retail investors possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
Following a 4.3% decrease in the stock price last week, retail investors suffered the most losses, but institutions who own 47% stock also took a hit.
Let's delve deeper into each type of owner of Royal Bank of Canada, beginning with the chart below.
Check out our latest analysis for Royal Bank of Canada
What Does The Institutional Ownership Tell Us About Royal Bank of Canada?
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 Royal Bank of Canada 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. 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 Royal Bank of Canada's historic earnings and revenue below, but keep in mind there's always more to the story.
Royal Bank of Canada is not owned by hedge funds. BMO Asset Management Corp. is currently the company's largest shareholder with 5.6% of shares outstanding. The Vanguard Group, Inc. is the second largest shareholder owning 3.8% of common stock, and RBC Global Asset Management Inc. holds about 2.6% of the company stock.
A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Royal Bank of Canada
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
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 information suggests that Royal Bank of Canada insiders own under 1% of the company. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own CA$21m worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
The general public, mostly comprising of individual investors, collectively holds 53% of Royal Bank of Canada shares. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Royal Bank of Canada better, we need to consider many other factors.
Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.
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.
