In the wake of boohoo group plc's (LON:BOO) latest UK£72m market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Institutions' substantial holdings in boohoo group implies that they have significant influence over the company's share price
• The top 6 shareholders own 51% of the company
• Insider ownership in boohoo group is 23%

If you want to know who really controls boohoo group plc (LON:BOO), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 40% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutional investors endured the highest losses after the company's share price fell by 15% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 48% might not go down well especially with this category of shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the downtrend continues, institutions may face pressures to sell boohoo group, which might have negative implications on individual investors.

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

Check out our latest analysis for boohoo group

What Does The Institutional Ownership Tell Us About boohoo group?

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 boohoo group. 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. 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 boohoo group's historic earnings and revenue below, but keep in mind there's always more to the story.

It would appear that 15% of boohoo group shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. From our data, we infer that the largest shareholder is Mahmud Kamani (who also holds the title of Top Key Executive) with 17% of shares outstanding. Its usually considered a good sign when insiders own a significant number of shares in the company, and in this case, we're glad to see a company insider play the role of a key stakeholder. In comparison, the second and third largest shareholders hold about 9.4% and 7.0% of the stock.

We did some more digging and found that 6 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 boohoo group

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Our information suggests that insiders maintain a significant holding in boohoo group plc. Insiders have a UK£97m stake in this UK£419m business. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 17% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand boohoo group better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for boohoo group you should know about.

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.