adidas AG's (ETR:ADS) latest 5.3% decline adds to one-year losses, institutional investors may consider drastic measures

Key Insights

• Significantly high institutional ownership implies adidas' stock price is sensitive to their trading actions
• A total of 25 investors have a majority stake in the company with 40% ownership
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

If you want to know who really controls adidas AG (ETR:ADS), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 53% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, institutional investors endured the highest losses last week after market cap fell by €1.4b. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 10% might not go down well especially with this category of shareholders. Often called “market makers”, 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 adidas which might hurt individual investors.

In the chart below, we zoom in on the different ownership groups of adidas.

Check out our latest analysis for adidas

What Does The Institutional Ownership Tell Us About adidas?

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.

adidas 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 adidas' historic earnings and revenue below, but keep in mind there's always more to the story.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in adidas. Looking at our data, we can see that the largest shareholder is BlackRock, Inc. with 6.0% of shares outstanding. Flossbach von Storch AG is the second largest shareholder owning 4.0% of common stock, and The Vanguard Group, Inc. holds about 3.8% of the company stock.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of adidas

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.

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. Not all jurisdictions have the same rules around disclosing insider ownership, and it is possible we have missed something, here. So you can click here learn more about the CEO.

General Public Ownership

The general public-- including retail investors -- own 47% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with adidas , 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.