Key Insights

• Given the large stake in the stock by institutions, NZME's stock price might be vulnerable to their trading decisions

• The top 7 shareholders own 51% of the company

• Insiders have been selling lately

A look at the shareholders of NZME Limited (NZSE:NZM) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 43% 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. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.

In the chart below, we zoom in on the different ownership groups of NZME.

See our latest analysis for NZME

What Does The Institutional Ownership Tell Us About NZME?

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 NZME does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at NZME's earnings history below. Of course, the future is what really matters.

It looks like hedge funds own 12% of NZME shares. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. The company's largest shareholder is Spheria Asset Management Pty Ltd, with ownership of 19%. Meanwhile, the second and third largest shareholders, hold 9.8% and 6.5%, of the shares outstanding, respectively. Additionally, the company's CEO Michael Boggs directly holds 1.3% of the total shares outstanding.

On further inspection, we found that more than half the company's shares are owned by the top 7 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There is some analyst coverage of the stock, but it could still become more well known, with time.