Ownership of public companies is vested in shareholders who acquire shares that are actively traded on recognized stock exchanges. The intricate dynamics of ownership in public companies, which can often be multilayered and complex, offer a practical subject for potential investors and business enthusiasts alike.
Understanding Shareholder Structures in Public Companies
Public companies often have a diverse mix of shareholders, with some companies having majority shareholders that own a significant portion of the company’s shares. Additionally, public companies can have multiple classes of shares, each carrying different voting rights. This often influences the company’s control dynamics, making the understanding of ownership in public companies a crucial factor for investors.
Finding Ownership Information: The American Perspective
For US companies, discovering ownership information is a fairly straightforward process. This is primarily because any shareholder who owns more than 5% of a public company’s shares is mandated to report the ownership. This information can be accessed through the Securities and Exchange Commission’s (SEC) EDGAR database.
To find such information, navigate to EDGAR and search a public company name or share symbol. Once the company profile is found, follow the link to filings. Under the proxy and information statement section, locate a DEF14A form. This form provides information about executive compensation and other company matters which require shareholder approval.
Within the DEF14A form, there is a section often titled “Security Ownership of Certain Beneficial Owners and Management.” This section lists all insider ownership and any shareholder owning more than 5% of the company. Notably, most public companies often list Blackrock & Vanguard as owning more than 5% of the company shares. However, these entities are index fund providers and not active investors.
Discovering Ownership in Canadian Public Companies
The process of finding ownership information for Canadian companies is similar to that of US companies. SEDAR, the Canadian equivalent of EDGAR, provides comprehensive information about publicly traded companies.
To find this information, navigate to SEDAR, search for a company by name, then look for a form called the “Management Information Circular.” Alternatively, check the “Annual Information Form” if the desired information is not in the circular. These documents typically contain a section titled “Principal Shareholders and the holders thereof” or a similar title.
However, it’s essential to note that certain regulated companies in Canada, such as banks, insurance companies, telecommunications companies, and some electric utilities, have specific ownership restrictions. As such, they report ownership differently, often in compliance with regulatory guidelines.
The Role of Share Classes in Public Companies
Sometimes, public companies have multiple classes of shares. These classes of shares carry different rights and votes. This is common in companies like Alphabet (Google) & Meta (Facebook), where the founders hold special voting shares that provide them with control of the company despite their minority ownership share. Similarly, several large companies in Canada, such as Brookfield Corporation and Power Corporation, have multiple voting share classes.
The Importance of Ownership Information to Investors
Understanding who owns a public company’s shares is crucial for investors. This information can guide investment decisions, ensuring alignment with investment objectives. For instance, if you’re seeking high growth or a takeover, such an outcome might not be plausible with a company whose share structure thwarts such possibilities. Also, if you’re an investor who values the “G” (Governance) aspect of ESG (Environmental, Social, and Governance) considerations, knowing that a company has multiple voting shares can influence your investment decisions as it is generally considered a sign of weak corporate governance.
Famed investor Peter Lynch says that its best to find stocks that are not followed closely by analysts or have much institutional (investment fund) ownership. The theory behind this preference is that the shares should have a lower value when this is the case.
In conclusion, understanding the ownership of a public company can provide valuable insights into its control dynamics, potential for growth, and adherence to good governance practices. Whether you are an investor, a business enthusiast, or simply curious, this knowledge can be a valuable tool in your decision-making arsenal.
