Institutional Ownership
Categories: Investing
You're scarfing down the Cap Table of ownership of a given publicly traded company. You note who owns what: Fidelity with 13.7%, Capital Research with 10.4%, Franklin Funds with 7.2%, and so on. Institutions like these, i.e., professional money managers, own big stakes. But insiders like the founders, very early venture capital investors, and other employees and strategic partners of the company, own 17.5%. So you'd say that institutional ownership here is 82.5%.
Why does this even matter? Well, insiders generally don't trade. That is, they are true owners in the long-term sense of the word, so volatility of their ownership stakes is relatively low.
If you saw huge insider ownership of a given company, you'd assume that its shares or ownership structure would have very different characteristics than if you saw Fidelity, three hedge funds, and a weird offshore family office owning 70% of the company combined. With their volatile trading patterns, they could sell out and be fully gone in a week if they wanted to be, making for a very unsettling shareholder experience for those remaining holding the bag, or the company shares.