We don’t support this browser anymore.
This means our website may not look and work as you would expect. Read more about browsers and how to update them here.

Skip to main content
  • Register
  • Help
  • Contact us

Do you really know who runs the companies you own?

With ownership structures in the spotlight, we look at what different situations could mean for investors.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

The newsreel’s been tripping over itself talking about Elon Musk’s recent purchase of almost $3bn worth of Twitter stock. He’s now the social media platform’s biggest shareholder and has since made an offer to take Twitter over.

This is a high profile and somewhat unusual example. But it serves as a reminder of the importance of share ownership. There are multiple different ownership structures when it comes to listed companies. It’s an important consideration before deciding to invest.

Increased share ownership tends to equal more control over the way the company is run. It means these shareholders have more voting rights than other shareholders.

Here, we take a whistle-stop tour of different ownership scenarios, and what they could mean for investors.

This article isn’t personal advice. If you’re not sure what’s right for your circumstances, please seek advice. All investments can fall as well as rise in value, so you could get back less than you invest.

How do I keep up to date with changes in ownership?

Keeping up to date with the comings and goings of share ownership isn’t for everyone. That’s why we have a dedicated Share Research team who provide free research on over 100 UK and international stocks.

Sign up to receive our share research

Founders and CEOs as majority shareholders

This one is more common than you think. The likes of Fraser Group’s Mike Ashley, or JD Wetherspoons’ Tim Martin are prime examples in the UK market. This scenario is when the person that set up the business is the single biggest shareholder.

In a lot of these cases, that individual is also the CEO. So, there’s an extra layer of corporate oversight controlled by one person.

There are benefits to this model. This type of shareholder is, in general, more invested in running the business for the long term. They will care even more about the company doing well, and are less pressured to achieve short-term success to please markets.

When increased voting power is in the hands of the company’s founder, it can mean bolder decisions are made than if a wider pool of more neutral parties pull the strings. Strategically, this can mean faster decisions and there are traditionally benefits for companies willing to grasp the nettle.

The flipside of this is it can be difficult for other investors to go against the CEO’s decisions if they hold a large proportion of voting rights through their shares. This can be challenging if the company is going in a strategic direction others disagree with, and there’s not too much that can be done.

Founder/majority shareholders are often synonymous with the brand too. Outspoken and unafraid individuals can be the very thing that draws investors in. This is all well and good, but it means the market reaction can be severe when it’s time for that person to step down. Or a PR blunder can have a disproportionate response to the company’s valuation when compared to a run-of-the-mill CEO.

What about family ownership?

This one is very closely related to the Founder scenario, but simply means multiple members of one family, rather than an individual, own the majority of shares. This is the case at luxury fashion powerhouse, LVMH, where CEO Bernard Arnault – who’s had the job for nearly 50 years – and his family own over 47% of the shares.

We’re very supportive of listed companies with family ownership structures. There’s even more motivation to protect the company for the long term, so a strong business and well-supported share price can be passed onto the next generation. If a company is your family’s crowning glory, there’s a far smaller risk of head-hunters being able to prize you away too, which reduces disruption to the investment case when it’s time for a changing of the guard in the top job.

The best kind of governance is when investors’ and management’s outcomes and priorities are aligned. This is more likely to be the case when there is significant family ownership.

Outsiders taking on large amounts of shares

This is what’s known as building a stake in a company. And there can be a couple of reasons an individual, or company will do this.

One possibility is a takeover offer. This is exactly what Elon Musk has done. It wasn’t too much of a surprise, as he’d refused a seat on Twitter’s board, which suggested a takeover bid could be on the horizon. In the UK, if a person acquires 30% or more of another company’s voting rights, then they must make an offer for the target company.

The other reason an investor might build up their shareholding is to try and influence how the company is run. Like we mentioned earlier, if an individual has a large chunk of voting rights, they wield more power. That can include over what will or won’t get voted through when it comes to changes at the company, and even who’s elected to the Board.

We talked about how activist investors can build influence at listed companies, how it happens and why in a recent article.

Read about activist investors

The other thing to keep in mind is, the market had a strong reaction to Musk’s stake-building before any takeover was imminent. It sent Twitter’s valuation soaring. The market puts a lot of weight on who owns a large number of shares – it really does matter to the outlook of a company.

Recent examples serve as a perfect reminder for investors to keep up to date with the ownership structure of companies they own. These can change quickly and have a real impact on how a business is run.

Share insight: our weekly email

Sign up to receive weekly shares content from HL.

Please correct the following errors before you continue:

    Existing client? Please log in to your account to automatically fill in the details below.

    Loading

    Your postcode ends:

    Not your postcode? Enter your full address.

    Loading

    Hargreaves Lansdown PLC group companies will usually send you further information by post and/or email about our products and services. If you would prefer not to receive this, please do let us know. We will not sell or trade your personal data.

    What did you think of this article?

    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

    Editor's choice – our weekly email

    Sign up to receive the week's top investment stories from Hargreaves Lansdown. Including:

    • Latest comment on economies and markets
    • Expert investment research
    • Financial planning tips
    Sign up

    Related articles

    Category: Shares

    3 shares at the centre of the clean energy revolution

    With the clean energy revolution well underway, we take a closer look at 3 shares that could stand to benefit.

    Laura Hoy

    20 May 2022 8 min read

    Category: Markets

    Next week on the stock market

    What to expect from a selection of FTSE 100, FTSE 250 and selected other companies reporting next week.

    Sophie Lund-Yates

    20 May 2022 5 min read

    Category: Shares

    Murray International Trust: May 2022 Update

    In this investment trust update, Lead Investment Analyst Kate Marshall shares our analysis on the manager, process, culture, ESG integration, cost and performance of the Murray International Trust.

    Kate Marshall

    19 May 2022 6 min read

    Category: Markets

    Next week on the stock market

    What to expect from a selection of FTSE 100, FTSE 250 and selected other companies reporting next week.

    Laura Hoy

    13 May 2022 6 min read