Grifols, S.A.'s (BME:GRF) latest 16% decline adds to one-year losses, institutional investors may consider drastic measures

Key Insights

• Significantly high institutional ownership implies Grifols' stock price is sensitive to their trading actions
• 51% of the business is held by the top 18 shareholders
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

A look at the shareholders of Grifols, S.A. (BME:GRF) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 43% ownership. 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 €5.1b last week after a 16% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 47% might not go down well especially with this category of shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the decline continues, institutional investors may be pressured to sell Grifols which might hurt individual investors.

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

Check out our latest analysis for Grifols

What Does The Institutional Ownership Tell Us About Grifols?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

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

We note that hedge funds don't have a meaningful investment in Grifols. The company's largest shareholder is Capital Research and Management Company, with ownership of 13%. For context, the second largest shareholder holds about 5.8% of the shares outstanding, followed by an ownership of 5.3% by the third-largest shareholder.

After doing some more digging, we found that the top 18 have the combined ownership of 51% 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 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 Grifols

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own less than 1% of Grifols, S.A.. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around €11m worth of shares (at current prices). Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

With a 36% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Grifols. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

Private equity firms hold a 5.3% stake in Grifols. This suggests they can be influential in key policy decisions. 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.

Private Company Ownership

We can see that Private Companies own 15%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Grifols better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Grifols (of which 1 can't be ignored!) you should know about.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.