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Institutions own 44% of The a2 Milk Company Limited (NZSE:ATM) shares but retail investors control 56% of the company

Key Insights

  • a2 Milk's significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public

  • 43% of the business is held by the top 25 shareholders

  • Insiders have been selling lately

Every investor in The a2 Milk Company Limited (NZSE:ATM) should be aware of the most powerful shareholder groups. We can see that retail investors own the lion's share in the company with 56% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And institutions on the other hand have a 44% ownership in the company. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders.

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Let's delve deeper into each type of owner of a2 Milk, beginning with the chart below.

See our latest analysis for a2 Milk

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About a2 Milk?

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 a2 Milk. 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 a2 Milk, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
earnings-and-revenue-growth

We note that hedge funds don't have a meaningful investment in a2 Milk. Perpetual Limited is currently the largest shareholder, with 7.6% of shares outstanding. With 5.7% and 5.5% of the shares outstanding respectively, Bangarra Group and Goldman Sachs Group, Investment Banking and Securities Investments are the second and third largest shareholders.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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 a2 Milk

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. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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 The a2 Milk Company Limited insiders own under 1% of the company. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own NZ$22m worth of shares. 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, who are usually individual investors, hold a substantial 56% stake in a2 Milk, suggesting it is a fairly popular stock. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.