NEXTDC Limited's (ASX:NXT) market cap dropped AU$480m last week; individual investors who hold 53% were hit as were institutions

Key Insights

• NEXTDC's significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• The top 25 shareholders own 44% of the company
• Institutional ownership in NEXTDC is 46%

To get a sense of who is truly in control of NEXTDC Limited (ASX:NXT), it is important to understand the ownership structure of the business. With 53% stake, retail investors possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While institutions who own 46% came under pressure after market cap dropped to AU$9.1b last week,retail investors took the most losses.

In the chart below, we zoom in on the different ownership groups of NEXTDC.

See our latest analysis for 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.

We can see that NEXTDC does have institutional investors; and they hold a good portion of the company's stock. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at NEXTDC's earnings history below. Of course, the future is what really matters.

NEXTDC is not owned by hedge funds. State Street Global Advisors, Inc. is currently the company's largest shareholder with 7.4% of shares outstanding. For context, the second largest shareholder holds about 5.7% of the shares outstanding, followed by an ownership of 5.2% by the third-largest shareholder.

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.

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

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our information suggests that NEXTDC Limited insiders own under 1% of the company. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own AU$48m worth of shares. 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 -- including retail investors -- own 53% of NEXTDC. 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Take risks for example - NEXTDC has 2 warning signs we think 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.