Institutional investors include pension funds, mutual funds, investment banks, hedge funds and other large financial institutions.
Sometimes financial reporting platforms, such as FactSet, will report a stockholder holding more than 100% of a company's outstanding shares. This is technically impossible, but various events can trigger this reporting anomaly.
Read on to learn about this strange occurrence.
FactSet explains securities can have a percentage of total ownership over 100% for the following reasons:
Short Interest – Both the lender and the borrower have claimed ownership of the securities on their filing.
Difference in 'as of' dates - Due to various reporting schedules (daily, monthly, quarterly, semi-annual or annual), there is often a window of time when holdings overlap.
Potential Double Counting – An institution's holdings could have been captured twice under two different names, perhaps due to a 13F name change or because the same holding has been captured from two different sources.
Co-advised mutual funds – Several sub-advisors of a fund erroneously report ownership of the same shares.
Misrepresented position on filing - The reported position actually included some instrument other than the common issue.
The upshot is, outstanding share ownership exceeding 100% could be down to a delay in updating the system with publicly available data. Alternatively, it could be caused by short selling.
* For an overview of short selling, read our guide on How to Short a Stock.
Short Selling
Short selling occurs when an investor bets against a stock. The investor borrows shares from an investor in the company, immediately sells them to another investor and hopes the price falls. If it does, they repurchase the shares at the lower price, return the shares to the original investor and pocket the difference.
Shorting is a common strategy used to hedge positions and is carried out by institutional and retail investors alike. Institutional investors have considerable sway over stock prices as they buy and sell shares in huge quantities.
Assume Company A has 10 million shares outstanding, and Institution A owns all 10 million. To short Company A, Institution B borrows 2 million shares from Institution A and sells them to Institution C.
While Institution A has lent the shares out, it may still consider itself the owner of these 2 million shares. Simultaneously Institution C also finds itself the owner. Therefore, in a reporting anomaly, Company A could appear to have 12 million shares outstanding (original 10m + 2m borrowed). In this instance, the institutional ownership could be reported as 120%.
Is Hammond Power Solutions (TSE: HPS.A) Stock About to Be Shorted?
One stock currently appearing on FactSet with institutional ownership exceeding 100% is Hammond Power Solutions Inc. (TSE: HPS.A).
FactSet shows Hammond’s shares held by institutions equals 460.7% (FactSet > Snapshot > Key Statistics > Institutional). Does this mean HPS stock is at risk of being heavily shorted? Let's take a closer look.
First, check the short interest (SI). High short interest is a clue that something is up. However, the short interest in Hammond Power Solutions is practically non-existent.
Next, check the float. Under FactSet's 'Ownership Summary'> 'Company' tab, the float is 87.6%, and institutional ownership is 31.9% of the float.
Finally, check 'Ownership Activity' for a view of recent share purchases.
The only recent share purchases appear to be by company insiders:
Fredrick M Jaques, HPS board member, purchased 5k shares in Q1, 2022.
William George Hammond, HPS Chairman and CEO, bought 26k shares in Q1, 2022.
As for institutional ownership, Fidelity Management & Research Co. LLC bought:
$4k shares in February
$3k shares in March
$2k shares in April
Considering recent ownership activity, it appears Hammond Power Solutions Inc. (TSE: HPS.A) is unlikely to be at imminent risk of a major short selling campaign.
*Checking the next day (FactSet > Snapshot > Key Statistics > Institutional) shows Hammond's shares held by institutions equals 28%, so the error appears to have righted itself.
Is Farmmi Inc (NASDAQ: FAMI) Stock About to Be Shorted?
Farmmi Inc (NASDAQ: FAMI) is a Chinese agricultural e-commerce and technology enterprise that offers trading platforms for agricultural products.
FactSet shows FAMI shares held by institutions equals 924.1% (FactSet > Snapshot > Key Statistics > Institutional). Does this mean FAMI stock is at risk of being shorted? Let's take a closer look.
FAMI short interest is 0.6%.
A day to cover above 10 indicates extreme pessimism, but FAMI has days to cover of 0.6. Therefore, it doesn't look like it's being heavily shorted.
Worth noting, FAMI has a higher individual ownership type than institutional.
As for institutional ownership, in March, Citadel bought $47k shares, and Millennium Management bought $33k shares.
Considering there hasn't been any significant share movement in recent months, it appears Farmmi Inc (NASDAQ: FAMI) is unlikely to be at imminent risk of a major short selling campaign.
