If you want to know who really controls NEXTDC Limited (ASX:NXT), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are individual investors with 58% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Following a 3.8% decrease in the stock price last week, individual investors suffered the most losses, but institutions who own 42% stock also took a hit.
In the chart below, we zoom in on the different ownership groups of NEXTDC.
What Does The Institutional Ownership Tell Us About NEXTDC?
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.
As you can see, institutional investors have a fair amount of stake in NEXTDC. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see NEXTDC's historic earnings and revenue below, but keep in mind there's always more to the story.
NEXTDC is not owned by hedge funds. BlackRock, Inc. is currently the largest shareholder, with 7.3% of shares outstanding. The second and third largest shareholders are UniSuper Limited and State Street Global Advisors, Inc., with an equal amount of shares to their name at 5.1%.
A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
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.
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 most recent data indicates that insiders own less than 1% of NEXTDC Limited. 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$8.8m worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
The general public, who are usually individual investors, hold a substantial 58% stake in NEXTDC, suggesting it is a fairly popular stock. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.
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 1 warning sign 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.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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