Following London Stock Exchange Group plc’s (LON:LSEG) latest £1.6 billion market capitalization drop, institutional owners may be forced to take tough action

Every investor in the London Stock Exchange Group plc (LON:LSEG) should know the most powerful shareholder groups. We can see that institutions hold the lion’s share of the business with 54% ownership. In other words, the group faces the maximum upside potential (or downside risk).

And institutional investors suffered the highest losses after the company’s share price fell 3.7% last week. The recent loss, on top of a 2.9% year-over-year loss to shareholders, may not be suitable for this group of investors. Often referred to as “market makers,” institutions wield significant power in influencing the price dynamics of any stock. As a result, if the decline continues, institutional investors could be forced to sell the London Stock Exchange Group, which could hurt individual investors.

Let’s take a closer look at what different types of shareholders can tell us about London Stock Exchange Group.

See our latest analysis for London Stock Exchange Group

LSE: LSEG Ownership Breakdown October 12, 2022

What does institutional ownership tell us about the London Stock Exchange Group?

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

London Stock Exchange Group already has institutions on the share register. Indeed, they hold a respectable stake in the company. This suggests some credibility with professional investors. But we cannot rely solely on this fact since institutions sometimes make bad investments, like everyone else. It is not uncommon to see a sharp decline in the stock price if two large institutional investors attempt to sell a stock at the same time. So it’s worth checking out the London Stock Exchange Group’s past earnings trajectory (below). Of course, keep in mind that there are other factors to consider as well.

LSE: LSEG Earnings and Revenue Growth October 12, 2022

Institutional investors own more than 50% of the company, so together they can probably heavily influence board decisions. Hedge funds don’t have a lot of shares in the London Stock Exchange Group. The company’s largest shareholder is Refinitiv US Holdings Inc., with a 22% stake. With 6.0% and 5.0% of the shares outstanding, respectively, Qatar Holding LLC and BlackRock, Inc. are the second and third largest shareholders.

We also observed that the top 10 shareholders represent more than half of the share register, with some small shareholders to balance the interests of the larger ones to some extent.

While studying the institutional ownership of a company can add value to your research, it is also recommended that you research analyst recommendations to better understand a stock’s expected performance. There are plenty of analysts covering the stock, so it might be interesting to see what they are predicting as well.

Insider ownership of the London Stock Exchange Group

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management is ultimately responsible to the board of directors. However, it is not uncommon for managers to be members of the management board, especially if they are founders or CEOs.

Insider ownership is positive when it signals that executives think like the true owners of the company. However, strong insider ownership can also give immense power to a small group within the company. This can be negative in certain circumstances.

Our most recent data indicates that insiders own less than 1% of London Stock Exchange Group plc. We note, however, that insiders may have an indirect interest through a private company or other corporate structure. As this is a large company, we expect insiders to own only a small percentage. But it should be noted that they hold £5.8m worth of shares. Arguably, recent purchases and sales are equally important to consider. You can click here to see if insiders have been buying or selling.

General public property

The general public, including retail investors, owns 17% of the company’s capital and therefore cannot be easily ignored. This size of ownership, although considerable, may not be sufficient to change company policy if the decision is not in line with other major shareholders.

Private equity ownership

The private equity firms hold a 6.0% stake in the London Stock Exchange Group. This suggests that they can influence key policy decisions. Sometimes we see private capital sticking around for the long haul, but generally they have a shorter investment horizon and, as the name suggests, don’t invest heavily in public companies. After a while, they may look to sell and redeploy capital elsewhere.

Private Company Ownership

Our data indicates that private companies own 22% of the company’s shares. It’s hard to draw conclusions from this fact alone, so it’s worth investigating who owns these private companies. Sometimes insiders or other related parties have an interest in shares of a public company through a separate private company.

Next steps:

While it is worth considering the different groups that own a business, there are other, even more important factors.

I like to dive deeper on the performance of a company in the past. You can find Earnings and Earnings History in this detailed graph.

If you prefer to find out what analysts are predicting in terms of future growth, don’t miss this free analyst forecast report.

NB: The figures in this article are calculated using trailing twelve month data, which refers to the 12 month period ending on the last day of the month the financial statements are dated. This may not be consistent with the annual report figures for the full year.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

Valuation is complex, but we help make it simple.

Find out if London Stock Exchange Group is potentially overvalued or undervalued by viewing our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.

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