In This Article:
Key Insights
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Significant control over Xero by retail investors implies that the general public has more power to influence management and governance-related decisions
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The top 25 shareholders own 37% of the company
If you want to know who really controls Xero Limited (ASX:XRO), then you'll have to look at the makeup of its share registry. We can see that retail investors own the lion's share in the company with 59% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Institutions, on the other hand, account for 33% of the company's stockholders. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones.
Let's take a closer look to see what the different types of shareholders can tell us about Xero.
View our latest analysis for Xero
What Does The Institutional Ownership Tell Us About Xero?
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.
Xero already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Xero's historic earnings and revenue below, but keep in mind there's always more to the story.
Xero is not owned by hedge funds. The Vanguard Group, Inc. is currently the largest shareholder, with 5.1% of shares outstanding. For context, the second largest shareholder holds about 5.0% of the shares outstanding, followed by an ownership of 4.1% by the third-largest shareholder.
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.
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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.