Yahoo Finance In the wake of Deutsche Telekom AG's (ETR:DTE) latest €4.6b market cap drop, institutional owners may be forced to take severe actions
Key Insights
Institutions' substantial holdings in Deutsche Telekom implies that they have significant influence over the company's share price
A total of 7 investors have a majority stake in the company with 50% ownership
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
Every investor in Deutsche Telekom AG (ETR:DTE) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 44% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
As a result, institutional investors endured the highest losses last week after market cap fell by €4.6b. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 2.1% for shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the decline continues, institutional investors may be pressured to sell Deutsche Telekom which might hurt individual investors.
Let's take a closer look to see what the different types of shareholders can tell us about Deutsche Telekom.
Check out our latest analysis for Deutsche Telekom
What Does The Institutional Ownership Tell Us About Deutsche Telekom?
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.
Deutsche Telekom 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Deutsche Telekom, (below). Of course, keep in mind that there are other factors to consider, too.
Deutsche Telekom is not owned by hedge funds. KfW, Asset Management Arm is currently the largest shareholder, with 17% of shares outstanding. Germany is the second largest shareholder owning 14% of common stock, and Softbank Group Capital Limited holds about 9.1% of the company stock.
On further inspection, we found that more than half the company's shares are owned by the top 7 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
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 Deutsche Telekom
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
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.
Our data cannot confirm that board members are holding shares personally. It is unusual not to have at least some personal holdings by board members, so our data might be flawed. A good next step would be to check how much the CEO is paid.
General Public Ownership
The general public-- including retail investors -- own 33% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
Private Equity Ownership
With a stake of 9.1%, private equity firms could influence the Deutsche Telekom board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Deutsche Telekom better, we need to consider many other factors. Be aware that Deutsche Telekom is showing 3 warning signs in our investment analysis , you should know about...
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.
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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.
