Santos Limited's (ASX:STO) market cap dropped AU$850m last week; individual investors who hold 51% were hit as were institutions
Key Insights
Santos' significant individual investors ownership suggests that the key decisions are influenced by shareholders from the larger public
The top 25 shareholders own 43% of the company
A look at the shareholders of Santos Limited (ASX:STO) can tell us which group is most powerful. With 51% stake, individual investors possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
While the holdings of individual investors took a hit after last week’s 3.4% price drop, institutions with their 43% holdings also suffered.
In the chart below, we zoom in on the different ownership groups of Santos.
See our latest analysis for Santos
What Does The Institutional Ownership Tell Us About Santos?
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.
Santos already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Santos' historic earnings and revenue below, but keep in mind there's always more to the story.
Hedge funds don't have many shares in Santos. The company's largest shareholder is United Faith Ventures Limited, with ownership of 5.2%. The second and third largest shareholders are State Street Global Advisors, Inc. and The Vanguard Group, Inc., with an equal amount of shares to their name at 5.1%.
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 it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Santos
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 data suggests that insiders own under 1% of Santos Limited in their own names. But they may have an indirect interest through a corporate structure that we haven't picked up on. 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 AU$30m 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, mostly comprising of individual investors, collectively holds 51% of Santos shares. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.
Private Company Ownership
Our data indicates that Private Companies hold 5.7%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Santos is showing 2 warning signs in our investment analysis , and 1 of those is 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.
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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