What You Need To Know About Merck & Co., Inc.'s (NYSE:MRK) Investor Composition

By
Simply Wall St
Published
May 21, 2021
NYSE:MRK
Source: Shutterstock

The big shareholder groups in Merck & Co., Inc. (NYSE:MRK) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. Companies that used to be publicly owned tend to have lower insider ownership.

With a market capitalization of US$200b, Merck is rather large. We'd expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. Our analysis of the ownership of the company, below, shows that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about Merck.

Check out our latest analysis for Merck

ownership-breakdown
NYSE:MRK Ownership Breakdown May 22nd 2021

What Does The Institutional Ownership Tell Us About Merck?

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 Merck. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Merck's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
NYSE:MRK Earnings and Revenue Growth May 22nd 2021

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 Merck. The Vanguard Group, Inc. is currently the largest shareholder, with 8.9% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.7% and 4.5% of the stock.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where 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 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 Merck

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.

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 data suggests that insiders own under 1% of Merck & Co., Inc. in their own names. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$128m 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

With a 25% ownership, the general public have some degree of sway over Merck. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Merck better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Merck you should be aware of.

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. 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.
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