In the wake of Walgreens Boots Alliance, Inc.'s (NASDAQ:WBA) latest US$397m market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Significantly high institutional ownership implies Walgreens Boots Alliance's stock price is sensitive to their trading actions
• 50% of the business is held by the top 12 shareholders
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

Every investor in Walgreens Boots Alliance, Inc. (NASDAQ:WBA) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 59% 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 US$397m. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 59% might not go down well especially with this category of 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 Walgreens Boots Alliance which might hurt individual investors.

In the chart below, we zoom in on the different ownership groups of Walgreens Boots Alliance.

Check out our latest analysis for Walgreens Boots Alliance

What Does The Institutional Ownership Tell Us About Walgreens Boots Alliance?

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.

Walgreens Boots Alliance 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. 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 Walgreens Boots Alliance, (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. Walgreens Boots Alliance is not owned by hedge funds. The company's largest shareholder is Newcip S.A., with ownership of 17%. For context, the second largest shareholder holds about 9.5% of the shares outstanding, followed by an ownership of 7.9% by the third-largest shareholder.

A closer look at our ownership figures suggests that the top 12 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Walgreens Boots Alliance

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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 information suggests that Walgreens Boots Alliance, Inc. insiders own under 1% of the company. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$41m of stock. 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

The general public, who are usually individual investors, hold a 24% stake in Walgreens Boots Alliance. 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 Company Ownership

We can see that Private Companies own 17%, of the shares on issue. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Walgreens Boots Alliance better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with Walgreens Boots Alliance .

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com