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Could The AGL Energy Limited (ASX:AGL) Ownership Structure Tell Us Something Useful?

Simply Wall St

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Every investor in AGL Energy Limited (ASX:AGL) should be aware of the most powerful shareholder groups. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Companies that used to be publicly owned tend to have lower insider ownership.

AGL Energy has a market capitalization of AU$14b, so it's too big to fly under the radar. We'd expect to see both institutions and retail investors owning a portion of the company. In the chart below below, we can see that institutional investors have bought into the company. Let's take a closer look to see what the different types of shareholder can tell us about AGL.

Check out our latest analysis for AGL Energy

ASX:AGL Ownership Summary, March 28th 2019

What Does The Institutional Ownership Tell Us About AGL Energy?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

AGL Energy already has institutions on the share registry. Indeed, they own 22% of the company. 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 fast. This risk is higher in a company without a history of growth. You can see AGL Energy's historic earnings and revenue, below, but keep in mind there's always more to the story.

ASX:AGL Income Statement, March 28th 2019

AGL Energy is not owned by hedge funds. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of AGL Energy

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 AGL Energy Limited insiders own under 1% of the company. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own AU$15m of stock. 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 -- mostly retail investors -- own 78% of AGL Energy . With this size 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 decline an acquisition or merger 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 access this interactive graph of past earnings, revenue and cash flow, for free .

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.