Yahoo Finance Institutional owners may take dramatic actions as Warner Bros. Discovery, Inc.'s (NASDAQ:WBD) recent 5.2% drop adds to one-year losses
Key Insights
Given the large stake in the stock by institutions, Warner Bros. Discovery's stock price might be vulnerable to their trading decisions
The top 25 shareholders own 47% of the company
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
To get a sense of who is truly in control of Warner Bros. Discovery, Inc. (NASDAQ:WBD), it is important to understand the ownership structure of the business. With 59% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$35b last week after a 5.2% 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 40% for shareholders. Often called “market makers”, institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in Warner Bros. Discovery's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.
Let's delve deeper into each type of owner of Warner Bros. Discovery, beginning with the chart below.
See our latest analysis for Warner Bros. Discovery
What Does The Institutional Ownership Tell Us About Warner Bros. Discovery?
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.
We can see that Warner Bros. Discovery does have institutional investors; and they hold a good portion of the company's stock. 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 Warner Bros. Discovery's earnings history below. Of course, the future is what really matters.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Warner Bros. Discovery. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 8.8% of shares outstanding. With 8.2% and 6.8% of the shares outstanding respectively, Advance Publications, Inc. and BlackRock, Inc. are the second and third largest shareholders.
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 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 Warner Bros. Discovery
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
We can see that insiders own shares in Warner Bros. Discovery, Inc.. The insiders have a meaningful stake worth US$496m. we sometimes take an interest in whether they have been buying or selling.
General Public Ownership
The general public, who are usually individual investors, hold a 32% stake in Warner Bros. Discovery. 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.
Private Company Ownership
Our data indicates that Private Companies hold 8.2%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Warner Bros. Discovery , and understanding them should be part of your investment process.
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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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