In the wake of Aon plc's (NYSE:AON) latest US$2.2b market cap drop, institutional owners may be forced to take severe actions
Key Insights
Institutions' substantial holdings in Aon implies that they have significant influence over the company's share price
A total of 13 investors have a majority stake in the company with 50% ownership
A look at the shareholders of Aon plc (NYSE:AON) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 86% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
As a result, institutional investors endured the highest losses last week after market cap fell by US$2.2b. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 8.9% for shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the decline continues, institutional investors may be pressured to sell Aon which might hurt individual investors.
In the chart below, we zoom in on the different ownership groups of Aon.
See our latest analysis for Aon
What Does The Institutional Ownership Tell Us About Aon?
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 Aon does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Aon's earnings history below. Of course, the future is what really matters.
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 Aon. The Vanguard Group, Inc. is currently the company's largest shareholder with 8.8% of shares outstanding. With 8.0% and 7.7% of the shares outstanding respectively, Capital Research and Management Company and Massachusetts Financial Services Company are the second and third largest shareholders. Additionally, the company's CEO Gregory Case directly holds 0.7% of the total shares outstanding.
Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 13 shareholders, meaning that no single shareholder has a majority interest in the ownership.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of Aon
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. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
Shareholders would probably be interested to learn that insiders own shares in Aon plc. It is a very large company, and board members collectively own US$684m worth of shares (at current prices). It is good to see this level of investment. You can check here to see if those insiders have been buying recently.
General Public Ownership
The general public, who are usually individual investors, hold a 10% stake in Aon. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Be aware that Aon is showing 3 warning signs in our investment analysis , and 1 of those is concerning...
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.
NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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. Simply Wall St has no position in any stocks mentioned.
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