Many investors choose to research the percentage of a company's stock that is being held by institutional investors as a way to gauge where larger investors are investing their money. Such institutions may include mutual funds, pension funds, big banks and other large financial institutions. 

It is obviously not technically possible for any shareholder or category of shareholder to hold more than 100% of a company's outstanding shares. Therefore, when you see investment information websites reporting institutional holdings exceeding the 100% mark, something is amiss with the data. There are two likely sources that are responsible for the reporting errors.

First, the figures released in an institution's report correspond to an "institutional holdings date." These can differ somewhat among the various institutions holding a company's stock, resulting in differences that could impact the reported percentage for total institutional holdings being displayed. The data presented are updated monthly with a lag of approximately four weeks. As a result, even a slight imprecision in the reporting dates among one or more institutions could throw off the count and make it appear as though one shareholder or institutional investor could hold more than 100% of a company's outstanding shares.

Sources of Confusion

Second, when checked with Ownership Analyzer, which provides data on institutional investors' holdings, the disparity is made somewhat clearer. Here is a summary of their take on the most likely cause of distorted institutional holdings percentages:

Let's assume that company XYZ has 20 million shares outstanding and institution A owns all 20 million. In a shorting transaction, institution B borrows 5 million of these shares from institution A and sells them to institution C. If both A and C claim ownership of the shares shorted by B, the institutional ownership of XYZ could be reported as 25 million shares (20 + 5), or 125% (25/20). In this event, the institutional holdings may be incorrectly reported as more than 100%.

In cases where reported institutional ownership exceeds 100%, actual institutional ownership would need to already be very high. While somewhat imprecise, arriving at this conclusion helps investors to determine the degree of the potential impact that institutional purchases and sales could have on a company's stock overall.

Institutional ownership and sponsorship of a particular company's stock, often driven by factors other than fundamentals, is not always a good gauge of stock quality. Investors taking a fundamental approach should take the time to understand the connection between a company's fundamentals and the interest the company attracts from large institutional investors. (See also: Institutional Investors And Fundamentals: What's The Link?)