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
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.
Can a company have more than 100 shares? ›
The minimum quantity of shares that a company can issue is one. This is common when someone is setting up a limited company as the sole owner and director. The Companies Act 2006 does not provide an upper limit, so you can issue as many shares as you like, either during or after the incorporation process.
What is institutional holdings percentage? ›
Institutional Ownership Percentage is the percentage of shares outstanding that is owned by financial institutions. These institutions can be banks, funds, large holdings companies, etc. Institutional ownership percentage is typically looked at by investors as a risk metric.
What is a good percentage of institutional ownership? ›
Most stocks in the US have institutional ownership rates between 50% and 90%. We would prefer a stock has an institutional ownership rate above 80% before we buy it but even if it is 50% or 60% we will still buy, as long as valuation is low.
What percentage of trading is institutional? ›
Institutional investors vs. retail investors: What are the differences?
| Institutional Investors | Retail Investors |
|---|
| SEC restrictions: | Fewer | More |
| Experience: | Professional | Amateur |
| Resources: | Many | Few |
| Percentage of trading volume: | ~90% | ~10% |
2 more rowsApr 8, 2024
If both A and C claim 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%.
Can you own 100% shares of a company? ›
A share denotes your ownership interest or how much of the corporation you own. For example, if you own 100 shares of a corporation that has issued 1,000 shares, your ownership in the corporation is 10 percent. Similarly, if you hold all the 1,000 shares, you own 100 percent of the corporation.
Which stock has the highest institutional ownership? ›
Institutional investor top holdings
| Stock | Aggregate value |
|---|
| AAPL Apple Inc. | $1,873,159,936 mm |
| NVDA NVIDIA Corporation | $1,809,412,563 mm |
| GOOG Alphabet Inc. | $1,408,906,957 mm |
| AMZN Amazon.com, Inc. | $1,211,019,614 mm |
6 more rowsValue is calculated for each institution by multiplying (closing stock price at the position date) * (share position). % Inst. Shares Is calculated by dividing the shares held by most recently reported total institutional ownership.
How much do institutional investors own? ›
"80% of Equity Market Cap Held by Institutions." EDUCBA. "Institutional Investors."
Managers ranked by total worldwide institutional assets under management
| # | Name | Percent change |
|---|
| 1 | Vanguard Group | -7.07% |
| 2 | BlackRock | -15.10% |
| 3 | State Street Global | -16.89% |
| 4 | Fidelity Investments | -14.81% |
6 more rowsMarket manipulation may involve techniques including: Spreading false or misleading information about a company; Engaging in a series of transactions to make a security appear more actively traded; and. Rigging quotes, prices, or trades to make it look like there is more or less demand for a security than is the case.
Are institutional investors good or bad? ›
Institutional investors are entitled to preferential treatment and lower fees. They are also subject to fewer protective rules because they are more qualified traders than individuals and thus better able to protect themselves.
What is the maximum amount of shares a company can have? ›
The maximum amount of share capital a company is allowed to raise is called its authorized capital. This does not limit the number of shares a company may issue but it puts a ceiling on the total amount of money that can be raised by the sale of those shares.
Can a company have 1000 shares? ›
For example, a corporation may have 1,000 shares and one shareholder may hold 800 shares, meaning the shareholder has an 80% ownership interest in the corporation.
Is 100 shares in a company a lot? ›
Stocks are most commonly sold in round lots, or lots of 100 shares or more. A lot of less than 100 shares is called an odd lot; odd lot transactions generally have greater commission costs associated with them.
Can as corporation have more than 100 shareholders? ›
Limited number of shareholders: An S corp cannot have more than 100 shareholders, meaning it can't go public and limiting its ability to raise capital from new investors. Other shareholder restrictions: Shareholders must be individuals (with a few exceptions) and U.S. citizens or residents.
