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Could The Drax Group plc (LON:DRX) Ownership Structure Tell Us Something Useful?

Simply Wall St

Every investor in Drax Group plc (LON:DRX) should be aware of the most powerful shareholder groups. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. Companies that used to be publicly owned tend to have lower insider ownership.

Drax Group isn't enormous, but it's not particularly small either. It has a market capitalization of UK£1.2b, which means it would generally expect to see some institutions on the share registry. In the chart below below, we can see that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about DRX.

See our latest analysis for Drax Group

LSE:DRX Ownership Summary, September 16th 2019

What Does The Institutional Ownership Tell Us About Drax Group?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that Drax Group does have institutional investors; and they hold 89% of the stock. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Drax Group's earnings history, below. Of course, the future is what really matters.

LSE:DRX Income Statement, September 16th 2019

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Drax Group is not owned by hedge funds. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Drax Group

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. The company management answer to the board; and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board, themselves.

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 Drax Group plc in their own names. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around UK£1.5m worth of shares (at current prices). 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

With a 11% ownership, the general public have some degree of sway over DRX. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Drax Group better, we need to consider many other factors.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.