Yahoo Finance With 88% institutional ownership, Rentokil Initial plc (LON:RTO) is a favorite amongst the big guns
Key Insights
Given the large stake in the stock by institutions, Rentokil Initial's stock price might be vulnerable to their trading decisions
A total of 21 investors have a majority stake in the company with 50% ownership
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
To get a sense of who is truly in control of Rentokil Initial plc (LON:RTO), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 88% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.
Let's take a closer look to see what the different types of shareholders can tell us about Rentokil Initial.
See our latest analysis for Rentokil Initial
What Does The Institutional Ownership Tell Us About Rentokil Initial?
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.
Rentokil Initial already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Rentokil Initial's historic earnings and revenue below, but keep in mind there's always more to the story.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in Rentokil Initial. Our data shows that BlackRock, Inc. is the largest shareholder with 7.9% of shares outstanding. In comparison, the second and third largest shareholders hold about 4.8% and 4.5% of the stock.
Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 21 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 Rentokil Initial
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. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our data suggests that insiders own under 1% of Rentokil Initial plc in their own names. However, it's possible that insiders might have an indirect interest through a more complex structure. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own UK£14m worth of shares. 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-- including retail investors -- own 10% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
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 Rentokil Initial is showing 2 warning signs in our investment analysis , and 1 of those shouldn't be ignored...
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
