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Block, Inc.'s (NYSE:SQ) latest 6.2% decline adds to one-year losses, institutional investors may consider drastic measures

Key Insights

  • Institutions' substantial holdings in Block implies that they have significant influence over the company's share price

  • The top 24 shareholders own 50% of the company

  • Insiders have sold recently

Every investor in Block, Inc. (NYSE:SQ) should be aware of the most powerful shareholder groups. With 63% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$34b last week after a 6.2% drop in the share price. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 34% for 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 decline continues, institutional investors may be pressured to sell Block which might hurt individual investors.

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

See our latest analysis for Block

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About Block?

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.

Block already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Block's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
earnings-and-revenue-growth

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in Block. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In Block's case, its President, Jack Dorsey, is the largest shareholder, holding 8.1% of shares outstanding. The Vanguard Group, Inc. is the second largest shareholder owning 5.8% of common stock, and BlackRock, Inc. holds about 4.2% of the company stock.

After doing some more digging, we found that the top 24 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Block

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.

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 most recent data indicates that insiders own a reasonable proportion of Block, Inc.. Insiders own US$3.5b worth of shares in the US$34b company. That's quite meaningful. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 27% stake in the company, and hence can't 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Block better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with Block .

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

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

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.

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