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The big shareholder groups in NEXTDC Limited (ASX:NXT) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. We also tend to see lower insider ownership in companies that were previously publicly owned.
NEXTDC is a pretty big company. It has a market capitalization of AU$5.5b. Normally institutions would own a significant portion of a company this size. In the chart below, we can see that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about NEXTDC.
What Does The Institutional Ownership Tell Us About NEXTDC?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
NEXTDC already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of NEXTDC, (below). Of course, keep in mind that there are other factors to consider, too.
NEXTDC is not owned by hedge funds. UniSuper Limited is currently the largest shareholder, with 6.2% of shares outstanding. In comparison, the second and third largest shareholders hold about 4.6% and 3.8% of the stock.
Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of NEXTDC
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our data suggests that insiders own under 1% of NEXTDC Limited 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 AU$36m worth of shares (at current prices). Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.
General Public Ownership
The general public -- mostly retail investors -- own 53% of NEXTDC. With this size of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 2 warning signs for NEXTDC that you should be aware of.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.
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.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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