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The big shareholder groups in Xaar plc (LON:XAR) have power over the company. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. Companies that have been privatized tend to have low insider ownership.
With a market capitalization of UK£137m, Xaar is a small cap stock, so it might not be well known by many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutional investors have bought into the company. Let's delve deeper into each type of owner, to discover more about Xaar.
What Does The Institutional Ownership Tell Us About Xaar?
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.
Xaar already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Xaar'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. Xaar is not owned by hedge funds. Schroder Investment Management Limited is currently the company's largest shareholder with 29% of shares outstanding. Aberforth Partners LLP is the second largest shareholder owning 11% of common stock, and Invesco Ltd. holds about 5.2% of the company stock.
Our research also brought to light the fact that roughly 54% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.
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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.
Insider Ownership Of Xaar
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.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our data suggests that insiders own under 1% of Xaar plc in their own names. It has a market capitalization of just UK£137m, and the board has only UK£485k worth of shares in their own names. I generally like to see a board more invested. However it might be worth checking if those insiders have been buying.
General Public Ownership
The general public, with a 16% stake in the company, will not easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
It's always worth thinking about the different groups who own shares in a company. But to understand Xaar better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Xaar , and understanding them should be part of your investment process.
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.
This article by Simply Wall St is general in nature. 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.
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