In the wake of Tate & Lyle plc's (LON:TATE) latest UK£96m market cap drop, institutional owners may be forced to take severe actions




  • In Business
  • 2022-09-28 07:31:59Z
  • By Simply Wall St.
 

A look at the shareholders of Tate & Lyle plc (LON:TATE) can tell us which group is most powerful. The group holding the most number of shares in the company, around 87% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, institutional investors endured the highest losses last week after market cap fell by UK£96m. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 1.3% for shareholders. Often called "market makers", institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in Tate & Lyle's 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 Tate & Lyle, beginning with the chart below.

See our latest analysis for Tate & Lyle

What Does The Institutional Ownership Tell Us About Tate & Lyle?

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.

Tate & Lyle already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Tate & Lyle's historic earnings and revenue below, but keep in mind there's always more to the story.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Tate & Lyle. Looking at our data, we can see that the largest shareholder is Columbia Management Investment Advisers, LLC with 11% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 6.9% and 4.4%, of the shares outstanding, respectively.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 18 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Tate & Lyle

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.

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 most recent data indicates that insiders own less than 1% of Tate & Lyle plc. Keep in mind that it's a big company, and the insiders own UK£6.8m worth of shares. The absolute value might be more important than the proportional share. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 10% stake in Tate & Lyle. 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Tate & Lyle (at least 1 which is potentially serious) , and understanding them should be part of your investment process.

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.

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