WPP plc's (LON:WPP) recent 7.6% pullback adds to one-year year losses, institutional owners may take drastic measures

Key Insights

• Institutions' substantial holdings in WPP implies that they have significant influence over the company's share price
• The top 9 shareholders own 50% of the company
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

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If you want to know who really controls WPP plc (LON:WPP), then you'll have to look at the makeup of its share registry. With 73% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors saw their holdings value drop by 7.6% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 51% 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 WPP which might hurt individual investors.

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

View our latest analysis for WPP

What Does The Institutional Ownership Tell Us About WPP?

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.

WPP 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 WPP, (below). Of course, keep in mind that there are other factors to consider, too.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. WPP is not owned by hedge funds. Our data shows that BlackRock, Inc. is the largest shareholder with 10% of shares outstanding. For context, the second largest shareholder holds about 5.4% of the shares outstanding, followed by an ownership of 5.3% by the third-largest shareholder.

We also observed that the top 9 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of WPP

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.

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 WPP plc. 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 UK£7.7m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

With a 27% ownership, the general public, mostly comprising of individual investors, have some degree of sway over WPP. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand WPP better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with WPP (at least 1 which can't be ignored) , and understanding them should be part of your investment process.

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.

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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.