Institutions own 39% of South32 Limited (ASX:S32) shares but individual investors control 57% of the company.

To get a sense of who is truly in control of South32 Limited (ASX:S32), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are individual investors with 57% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And institutions on the other hand have a 39% ownership in the company. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of smaller companies.

Let’s take a closer look to see what the different types of shareholders can tell us about South32.

Our analysis indicates that S32 is potentially undervalued!

ASX:S32 Ownership Breakdown November 24th 2022

What Does The Institutional Ownership Tell Us About South32?

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 South32. 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. 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 quickly. This risk is higher in a company without a history of growth. You can see South32’s historical earnings and revenue below, but keep in mind there’s always more to the story.

earnings-and-revenue-growth
ASX:S32 Earnings and Revenue Growth November 24th 2022

South32 is not owned by hedge funds. BlackRock, Inc. is currently the largest shareholder, with 7.1% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.2% and 5.2% of the stock.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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 understanding of a stock’s expected performance. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of South32

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management runs the business, but the CEO will answer to the board, even if he or she is a member of it.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our data suggests that insiders own less than 1% of South32 Limited in their own names. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Although their holding amounts to less than 1%, we can see that board members collectively own AU$38m worth of shares (at current prices). In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a substantial 57% stake in South32, 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. Like risks, for instance. Every company has them, and we’ve spotted them 2 warning signs for South32 (of which 1 is a bit concerning!) you should know about.

If you would prefer to 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.

Valuation is complex, but we’re helping make it simple.

Find out whether South32 is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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.

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