Many investors choose to research the percentage of a company's stock held by institutional investors as a way to gauge where larger investors are investing their money. These institutions may include mutual funds, pension funds, big banks,and other large financial institutions.They represent the largest source of supply and demand in the market, and are the first ones who participate in the primary market. Institutional investors are also responsible for the majority of trades on the secondary market. Because of this, they have a great influence on stock prices.
If you see investors hold more than 100% of a company's shares, you should assume there is a problem with the data.
Sometimes, you may come across a case where an investor appears to hold shares in a company that far exceeds what actually exists. Obviously, it's technically impossible for any shareholder or category of shareholder—institutional or individual—to hold more than 100% of a company's outstanding shares. So when you see investment information websites reporting institutional holdings that exceed 100%, you can probably assume there is something wrong with the data. There are two likely sources responsible for these reporting errors.
Key Takeaways
- Institutional investors have a great influence on the market, and the way they trade can affect the way stock prices move.
- There are instances where investors appear to hold shares in a company that far exceeds what actually exists.
- If you see investors holding more than 100% in a company, it may be due to a delay in updates.
- Another reason for exceeding the 100% holding mark may stem from short selling between investors.
Slow Updates
The first, and usually most obvious, reason to explain why an institutional investor holds more than 100% of a company's shares stems from delays in updating publicly available data. The figures released in an institution's report correspond to an institutional holding's date.These dates generally differ somewhat among all of the institutions that hold a company's stock, resulting in differences that could impact the reported percentage for total institutional holdings being displayed.
The numbers presented are updated on a monthly basis with alag of approximatelyfour weeks. As a result, even a slight delay in the reporting dates among one or more institutions could throw off the count, making it appear as though one shareholder or investor holds more than 100% of acompany's outstanding shares.
Short Selling
Along with the delays in reporting ownership between institutional investors, another situation may arise that can cause a sudden bump in institutional ownership of stock: Short selling. Remember, short selling is when one investor borrows shares in a company and immediately sells them to another investor. In many cases, some investors plan to buy the shares back for less money.
Here's an example of one of the most likely causes of distorted institutional holdings percentages. Let's assume Company XYZ has 20 million shares outstanding and Institution A owns all 20 million. In a shorting transaction, institution B borrows five million of theseshares from Institution A, then sells them to Institution C. If both A and Cclaim ownership of the shares shorted by B, the institutional ownership of Company XYZ could be reported as 25 million shares (20 + 5)—or 125% (25 ÷ 20). In this case, institutional holdings may be incorrectly reported as more than 100%.
In cases where reported institutional ownership exceeds 100%, actual institutional ownership would need to already be very high. While somewhat imprecise, arriving at this conclusion helps investors todetermine the degree of the potential impact that institutional purchases and sales could have on a company's stock overall.
The Bottom Line
Institutional ownership and sponsorship of a particular company's stock, often driven by factors other than fundamentals, are not always good gauges of stock quality. Investors taking afundamentalapproach should take the time to understand the connection between a company's fundamentals and the interest the company attracts from large institutional investors.
FAQs
There are instances where investors appear to hold shares in a company that far exceeds what actually exists. If you see investors holding more than 100% in a company, it may be due to a delay in updates. Another reason for exceeding the 100% holding mark may stem from short selling between investors.
How can more than 100 percent of stock be owned? ›
In some cases, multiple investors may borrow and sell the same shares, resulting in a situation where the total number of shares sold (including those that have been borrowed and sold multiple times) exceeds the number of shares outstanding. This can result in institutional ownership appearing to be over 100%.
What is a high percentage of institutional ownership? ›
Companies that have a high percentage of institutional ownership – let's say 80% or higher – have some inherent characteristics that institutions find desirable. You'll never be able to figure out the reason for the high ownership, but it's usually a good sign.
Can a company have more than 100 shares? ›
The number of authorized shares per company is assessed at the company's creation and can only be increased or decreased through a vote by the shareholders. If at the time of incorporation the documents state that 100 shares are authorized, then only 100 shares can be issued.
What percent of the stock is held by institutional investors? ›
What percentage of investors are institutional? Institutional investors account for about 80% of the volume of trades on the New York Stock Exchange.
What stock has the highest institutional ownership? ›
Institutional investor top holdings
| Stock | Aggregate value |
|---|
| MSFT Microsoft Corporation | $1,358,080,511 mm |
| AAPL Apple Inc | $1,106,338,898 mm |
| GOOGL Alphabet Inc - Ordinary Shares | $829,510,406 mm |
| iSHARES INC | $825,230,154 mm |
6 more rowsInstitutions hold two-thirds (66%) of the value-weighted average firm and invest, on average, 1.81% Page 20 19 of AUM in the firm.
Is it good if a stock has high institutional ownership? ›
Stocks with a large amount of institutional ownership are often looked upon favorably. Large entities frequently employ a team of analysts to perform detailed and expensive financial research before the group purchases a large block of a company's stock.
Is it good if a stock has a lot of institutional ownership? ›
Institutional Ownership Percentage
As more institutions take ownership in a stock, the more stable the price tends to be.
Is it good if a stock is owned by institutional investors? ›
One of the primary benefits of the institutional ownership of securities is their involvement is seen as being smart money. Portfolio managers often have teams of analysts at their disposal, as well as access to a host of corporate and market data most retail investors could only dream of.
A corporation is owned by shareholders. If you are the sole owner of the company, then you own 100 percent of the shares. If there are other owners besides yourself, the ownership position of each is based on the percentage of the total shares owned.
What are institutional holdings? ›
About Institutional Holdings
Nasdaq provides the ownership stake information in a company, including the number of shares held by those institutions in a firm, along with recent purchases and sales information. Institutional Holdings information can be used to gauge the volatility and value on the company's stock.
How many shares does Elon Musk own in Tesla? ›
How much of S&P 500 is owned by institutional investors? ›
Institutions own about 78% of the market value of the U.S. broad-market Russell 3000 index, and 80% of the large-cap S&P 500 index. In dollars, that is about $21.7 trillion and $18 trillion, respectively.
Who is the largest institutional investor in the world? ›
Managers ranked by total worldwide institutional assets under management
| # | Name | 2021 |
|---|
| 1 | Vanguard Group | $5,407,000 |
| 2 | BlackRock | $5,694,077 |
| 3 | State Street Global | $2,905,408 |
| 4 | Fidelity Investments | $2,032,626 |
6 more rowsRisks in Institutional Investing
They include a lack of qualified, experienced appraisers and a lack of a clear and well-established policy on the payments of dividends. Problems with the work organization of management structure and officials.
What does it mean if institutional ownership is over 100%? ›
There are instances where investors appear to hold shares in a company that far exceeds what actually exists. If you see investors holding more than 100% in a company, it may be due to a delay in updates. Another reason for exceeding the 100% holding mark may stem from short selling between investors.
What is a large institutional investor? ›
Institutional investors include the following organizations: credit unions, banks, large funds such as a mutual or hedge fund, venture capital funds, insurance companies, and pension funds. Institutional investors exert a significant influence on the market, both in a positive and negative way.
What is common institutional ownership? ›
We define a common owner as an institutional investor who holds at least 5% of stock in two or more firms in the same four-digit SIC code industry. The fraction of shares held by a common owner is defined as common institutional ownership.
What percentage is majority ownership? ›
A majority shareholder is a person or entity who holds more than 50% of shares of a company. If the majority shareholder holds voting shares, they dictate the direction of the company through their voting power.
