1&1 AG's (ETR:1U1) last week's 4.1% decline must have disappointed public companies who have a significant stake

Key Insights

• Significant control over 1&1 by public companies implies that the general public has more power to influence management and governance-related decisions
• The largest shareholder of the company is United Internet AG with a 78% stake
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

If you want to know who really controls 1&1 AG (ETR:1U1), then you'll have to look at the makeup of its share registry. We can see that public companies own the lion's share in the company with 78% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, public companies as a group endured the highest losses last week after market cap fell by €92m.

In the chart below, we zoom in on the different ownership groups of 1&1.

Check out our latest analysis for 1&1

What Does The Institutional Ownership Tell Us About 1&1?

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.

As you can see, institutional investors have a fair amount of stake in 1&1. 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 1&1, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in 1&1. Our data shows that United Internet AG is the largest shareholder with 78% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. In comparison, the second and third largest shareholders hold about 1.6% and 1.0% of the stock.

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.

Insider Ownership Of 1&1

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. 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 most recent data indicates that insiders own less than 1% of 1&1 AG. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around €2.5m worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 15% ownership, the general public, mostly comprising of individual investors, have some degree of sway over 1&1. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Public Company Ownership

We can see that public companies hold 78% of the 1&1 shares on issue. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

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 - 1&1 has 1 warning sign 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.