Tower Limited (NZSE:TWR) is a favorite amongst institutional investors who own 56%

Key Insights

• Significantly high institutional ownership implies Tower's stock price is sensitive to their trading actions
• The top 9 shareholders own 52% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

A look at the shareholders of Tower Limited (NZSE:TWR) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 56% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.

Let's delve deeper into each type of owner of Tower, beginning with the chart below.

See our latest analysis for Tower

What Does The Institutional Ownership Tell Us About Tower?

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.

We can see that Tower does have institutional investors; and they hold a good portion of the company's stock. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Tower, (below). Of course, keep in mind that there are other factors to consider, too.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in Tower. Our data shows that Bain Capital Credit, LP is the largest shareholder with 18% of shares outstanding. With 7.9% and 5.8% of the shares outstanding respectively, Accident Compensation Corporation, Asset Management Arm and Pacific International Insurance Pty Ltd, Asset Management Arm are the second and third largest shareholders.

We did some more digging and found that 9 of the top shareholders account for roughly 52% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 Tower

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own less than 1% of Tower Limited. However, it's possible that insiders might have an indirect interest through a more complex structure. It has a market capitalization of just NZ$512m, and the board has only NZ$3.2m worth of shares in their own names. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 39% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Tower. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Company Ownership

It seems that Private Companies own 4.3%, of the Tower stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the 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. Take risks for example - Tower has 1 warning sign we think you should be aware of.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

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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.