Why The Shareholder Ownership Structure Is Important For The General Electric Company (NYSE:GE)

·4 min read

This article was originally published on Simply Wall St News.

The big shareholder groups in General Electric Company ( NYSE:GE ) have power over the company. There are a few main types of major shareholders in a company: Insiders, institutions and the general public. Insiders often own a large chunk of younger companies, while large companies tend to have institutions as shareholders.

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. They also adopt mostly long strategies, but can start unwinding their positions if the company consistently underperforms.

As you can see from the image below, the company has not recovered from the last two shakeups, even with the government assistance.

General Electric is a pretty big company. It has a market capitalization of US$123b. Normally, institutions would own a significant portion of a company this size. Taking a look at our data on the ownership groups (below), it seems that institutions are noticeable on the share registry. Let's delve deeper into each type of owner, to discover more about General Electric.

View our latest analysis for General Electric

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About General Electric?

As you can see, institutional investors have a fair amount (64.8%) of stake in General Electric. This can indicate that the company has a certain degree of credibility in the investment community.

It is best to be wary of relying on the supposed validation that comes with institutional investors. They also get it wrong sometimes.

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 General Electric, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
earnings-and-revenue-growth

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences.

Hedge funds don't have many shares in General Electric. Our data shows that T. Rowe Price Group, Inc. is the largest shareholder with 8.7% of shares outstanding. With 7.4% and 6.5% of the shares outstanding respectively, The Vanguard Group, Inc. and BlackRock, Inc. are the second and third-largest shareholders.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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 understanding of a stock's expected performance.

Insider Ownership Of General Electric

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least.

Company management reports to the board, and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company.

Our information suggests that General Electric Company insiders own under 1% of the company. Collectively, they own US$297m of stock. This is a very low ownership stake, and it does not command accountability to shareholders from management.

It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public holds a 35% stake in General Electric. While this size of ownership may not be enough to sway a policy decision in their favor, they can still make a collective impact on company policies.

Conclusion

The ownership of GE is mixed between the general public with close to 35% and the institutions with close to 65% of shares.

It seems that the public has limited influence on GE and the institutions have the majority of the say.

So from the point of view of an investor, it's interesting to know that the primary shareholders are institutions, and the general public, because that will influence how some business decisions are made, such as: election of board members, large expansion or shrinking moves by the company, etc.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

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.

Simply Wall St analyst Goran Damchevski and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

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