Ownership

How shareholder composition reveals structural information about alignment, governance, and float dynamics.

Ownership analysis studies a company's shareholder composition. Different owners have different motivations, time horizons, and behaviors, which affect stock dynamics and corporate governance.

The structural relevance of ownership lies in what it reveals about alignment between management and shareholders, the stability of the shareholder base, and the availability of shares for trading.

Types of Shareholders

Insider Ownership

Company executives and directors who own shares:

• Founders: Often largest individual holders with long-term perspective
• CEO and executives: Key decision-makers whose economic interest may align with shareholders
• Board members: Oversight responsibility, typically smaller holdings
• Employees: Through stock plans, options, and employee stock purchase plans

Institutional Ownership

Professional investors including:

• Mutual funds: Both active managers and index funds
• Pension funds: Long-term oriented with fiduciary obligations
• Hedge funds: More active trading, may be activists
• Insurance companies: Liability-matching focus, generally stable holders
• Endowments: Very long time horizons, patient capital

Retail Ownership

Individual investors who purchase shares directly through brokers. Retail ownership can be significant in smaller companies.

Key Ownership Metrics

Insider Ownership Percentage

Insider Ownership = Insider Shares / Total Shares Outstanding

• 5-20%: Generally indicates alignment between management and shareholder interests
• Above 30%: Strong alignment but potential governance concentration
• Very low: Possible lack of management economic commitment

Institutional Ownership Percentage

Institutional Ownership = Institutional Shares / Total Shares Outstanding

• High institutional ownership reflects professional interest in the stock
• Very high (90%+) may indicate concentrated positioning
• Changes in institutional ownership are observable through quarterly filings

Float

Float = Shares Outstanding - Insider Shares - Restricted Shares

Low float increases volatility since fewer shares are available for trading.

Ownership Changes as Observable Events

Insider Buying

Executives purchasing shares with their own money on the open market:

• They have direct knowledge of the business
• Using personal capital places their own money at risk
• Cluster buying (multiple insiders) is a stronger signal than isolated transactions
• Open-market purchases are more informative than option exercises

Insider Selling

More ambiguous -- may reflect:

• Diversification needs and estate planning
• Tax obligations from equity compensation
• Personal life events (home purchase, divorce, etc.)
• A range of other motivations not visible from the filing alone

Institutional Accumulation

Large investors building positions, observable through 13F filings with a 45-day delay.

Ownership and Governance

• Concentrated ownership: Dominant shareholders control major decisions
• Dispersed ownership: Professional management has more power, potentially less accountability
• Dual-class shares: Founders retain control despite minority economic interest
• Activist involvement: May drive operational or strategic changes

Regulatory Disclosure

• Form 4 filings reveal insider transactions within 2 business days
• 13F filings show institutional holdings quarterly (with 45-day delay)
• 13D filings indicate activist positions above 5%
• Proxy statements detail insider ownership and compensation

Ownership data describes the current composition of a company's shareholder base and recent changes to it. It does not predict future stock price movements, nor does insider activity in isolation indicate whether a stock is over- or undervalued.