Institutional owners may consider drastic measures as WW International, Inc.'s (NASDAQ:WW) recent US$16m drop adds to long-term losses

Key Insights

• Institutions' substantial holdings in WW International implies that they have significant influence over the company's share price
• The top 25 shareholders own 49% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

Every investor in WW International, Inc. (NASDAQ:WW) should be aware of the most powerful shareholder groups. With 53% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutional investors endured the highest losses after the company's share price fell by 12% last week. The recent loss, which adds to a one-year loss of 79% for stockholders, may not sit well with this group of investors. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in WW International's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

Let's take a closer look to see what the different types of shareholders can tell us about WW International.

See our latest analysis for WW International

What Does The Institutional Ownership Tell Us About WW International?

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.

As you can see, institutional investors have a fair amount of stake in WW International. 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. 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 WW International's 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. It would appear that 5.1% of WW International shares are controlled by hedge funds. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 5.6% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.3% and 5.1% of the stock.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of WW International

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 suggests that insiders own under 1% of WW International, Inc. in their own names. It has a market capitalization of just US$114m, and the board has only US$1.1m worth of shares in their own names. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 40% stake in WW International. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for WW International you should be aware of, and 1 of them is a bit concerning.

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.

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