Institutional investors may overlook Deutsche Börse AG's (ETR:DB1) recent €3.2b market cap drop as long-term gains remain positive

Key Insights

• Given the large stake in the stock by institutions, Deutsche Börse's stock price might be vulnerable to their trading decisions
• The top 25 shareholders own 49% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

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To get a sense of who is truly in control of Deutsche Börse AG (ETR:DB1), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 63% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 6.1% in value last week. However, the 49% one-year returns may have helped alleviate their overall losses. But they would probably be wary of future losses.

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

Check out our latest analysis for Deutsche Börse

What Does The Institutional Ownership Tell Us About Deutsche Börse?

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.

Deutsche Börse already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Deutsche Börse's historic earnings and revenue below, but keep in mind there's always more to the story.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Deutsche Börse. BlackRock, Inc. is currently the company's largest shareholder with 7.3% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.0% and 4.4%, of the shares outstanding, respectively.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Deutsche Börse

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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.

We note our data does not show any board members holding shares, personally. Given we are not picking up on insider ownership, we may have missing data. Therefore, it would be interesting to assess the CEO compensation and tenure, here.

General Public Ownership

With a 36% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Deutsche Börse. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

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

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.