Retail investors who have a significant stake must be disappointed along with institutions after RWE Aktiengesellschaft's (ETR:RWE) market cap dropped by €937m

Key Insights

• Significant control over RWE by retail investors implies that the general public has more power to influence management and governance-related decisions
• The top 25 shareholders own 40% of the company
• Institutional ownership in RWE is 36%

If you want to know who really controls RWE Aktiengesellschaft (ETR:RWE), then you'll have to look at the makeup of its share registry. With 55% stake, retail investors possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

While institutions, who own 36% shares weren’t spared from last week’s €937m market cap drop, retail investors as a group suffered the maximum losses

Let's take a closer look to see what the different types of shareholders can tell us about RWE.

View our latest analysis for RWE

What Does The Institutional Ownership Tell Us About RWE?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

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

Hedge funds don't have many shares in RWE. Qatar Holding LLC is currently the largest shareholder, with 9.0% of shares outstanding. The second and third largest shareholders are BlackRock, Inc. and Merrill Lynch & Co. Inc., Banking Investments, with an equal amount of shares to their name at 5.2%.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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

Insider Ownership Of RWE

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

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.

Our data cannot confirm that board members are holding shares personally. It is unusual not to have at least some personal holdings by board members, so our data might be flawed. A good next step would be to check how much the CEO is paid.

General Public Ownership

The general public -- including retail investors -- own 55% of RWE. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Private Equity Ownership

Private equity firms hold a 9.0% stake in RWE. This suggests they can be influential in key policy decisions. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand RWE better, we need to consider many other factors. Be aware that RWE is showing 2 warning signs in our investment analysis , and 1 of those is significant...

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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.

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