Institutional investors may overlook Digital Turbine, Inc.'s (NASDAQ:APPS) recent US$75m market cap drop as long-term gains remain positive

Key Insights

• Given the large stake in the stock by institutions, Digital Turbine's stock price might be vulnerable to their trading decisions
• A total of 22 investors have a majority stake in the company with 50% ownership
• Using data from company's past performance alongside ownership research, one can better assess the future performance of a company

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To get a sense of who is truly in control of Digital Turbine, Inc. (NASDAQ:APPS), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 55% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 14% in value last week. However, the 63% one-year return to shareholders might have softened the blow. They should, however, be mindful of further losses in the future.

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

See our latest analysis for Digital Turbine

What Does The Institutional Ownership Tell Us About Digital Turbine?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors have a fair amount of stake in Digital Turbine. 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. 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 Digital Turbine's earnings history below. Of course, the future is what really matters.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in Digital Turbine. The Vanguard Group, Inc. is currently the company's largest shareholder with 8.3% of shares outstanding. In comparison, the second and third largest shareholders hold about 6.7% and 5.6% of the stock. Furthermore, CEO William Stone is the owner of 1.6% of the company's shares.

A closer look at our ownership figures suggests that the top 22 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Digital Turbine

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.

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 most recent data indicates that insiders own some shares in Digital Turbine, Inc.. In their own names, insiders own US$24m worth of stock in the US$504m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

With a 33% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Digital Turbine. 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 Equity Ownership

Private equity firms hold a 5.5% stake in Digital Turbine. This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. For instance, we've identified 2 warning signs for Digital Turbine (1 is significant) that you should be aware of.

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.