Yahoo Finance In the wake of National Grid plc's (LON:NG.) latest UK£9.0b market cap drop, institutional owners may be forced to take severe actions
Key Insights
Significantly high institutional ownership implies National Grid's stock price is sensitive to their trading actions
A total of 25 investors have a majority stake in the company with 45% 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 National Grid plc ( LON:NG. ), 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 79% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
And institutional investors saw their holdings value drop by 21% - due to a 7-for-24 rights issue announced, aiming to raise £7 billion- last week. The recent loss, which adds to a one-year loss of 6.3% 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 National Grid's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.
Let's take a closer look to see what the different types of shareholders can tell us about National Grid.
See our latest analysis for National Grid
What Does The Institutional Ownership Tell Us About National Grid?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
As you can see, institutional investors have a fair amount of stake in National Grid. 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 National Grid's earnings history below. Of course, the future is what really matters.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in National Grid. The company's largest shareholder is BlackRock, Inc., with ownership of 8.4%. For context, the second largest shareholder holds about 5.0% of the shares outstanding, followed by an ownership of 2.8% by the third-largest shareholder.
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.
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 National Grid
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.
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 National Grid plc 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 UK£18m 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, who are usually individual investors, hold a 20% stake in National Grid. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand National Grid better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for National Grid you should be aware of, and 2 of them are concerning.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.
