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To get a sense of who is truly in control of Xero Limited (ASX:XRO), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 53% to be precise, is individual investors. Put another way, the group faces the maximum upside potential (or downside risk).
While individual investors were the group that benefitted the most from last week’s AU$916m market cap gain, institutions too had a 37% share in those profits.
In the chart below, we zoom in on the different ownership groups of Xero.
View our latest analysis for Xero
What Does The Institutional Ownership Tell Us About Xero?
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.
We can see that Xero does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Xero, (below). Of course, keep in mind that there are other factors to consider, too.
Xero is not owned by hedge funds. From our data, we infer that the largest shareholder is Rod Drury (who also holds the title of Top Key Executive) with 6.6% of shares outstanding. Its usually considered a good sign when insiders own a significant number of shares in the company, and in this case, we're glad to see a company insider play the role of a key stakeholder. Hyperion Asset Management Limited is the second largest shareholder owning 6.3% of common stock, and Pinnacle Fund Services Limited holds about 6.0% of the company stock.
On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Xero
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.