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Xero Limited's (ASX:XRO) 6.7% loss last week hit both individual investors who own 60% as well as institutions

Key Insights

  • Significant control over Xero by retail investors implies that the general public has more power to influence management and governance-related decisions

  • 37% of the business is held by the top 25 shareholders

  • Institutions own 31% of Xero

A look at the shareholders of Xero Limited (ASX:XRO) can tell us which group is most powerful. We can see that retail investors own the lion's share in the company with 60% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While institutions who own 31% came under pressure after market cap dropped to AU$19b last week,retail investors took the most losses.

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Let's delve deeper into each type of owner of Xero, beginning with the chart below.

View our latest analysis for Xero

ownership-breakdown
ownership-breakdown

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.

Xero already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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.

earnings-and-revenue-growth
earnings-and-revenue-growth

We note that hedge funds don't have a meaningful investment in Xero. Looking at our data, we can see that the largest shareholder is Rodney Drury with 6.5% of shares outstanding. The second and third largest shareholders are The Vanguard Group, Inc. and Hyperion Asset Management Limited, with an equal amount of shares to their name at 5.1%.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Xero

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.

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.

We can report that insiders do own shares in Xero Limited. It is a very large company, and board members collectively own AU$1.7b worth of shares (at current prices). we sometimes take an interest in whether they have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a substantial 60% stake in Xero, suggesting it is a fairly popular stock. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Next Steps:

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

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.