Institutional owners may take dramatic actions as Digital Turbine, Inc.'s (NASDAQ:APPS) recent 4.7% drop adds to one-year losses

By
Simply Wall St
Published
April 17, 2022
NasdaqCM:APPS
Source: Shutterstock

If you want to know who really controls Digital Turbine, Inc. (NASDAQ:APPS), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 65% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, institutional investors endured the highest losses last week after market cap fell by US$178m. 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 Digital Turbine which might hurt individual investors.

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

View our latest analysis for Digital Turbine

ownership-breakdown
NasdaqCM:APPS Ownership Breakdown April 17th 2022

What Does The Institutional Ownership Tell Us About Digital Turbine?

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.

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

earnings-and-revenue-growth
NasdaqCM:APPS Earnings and Revenue Growth April 17th 2022

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Digital Turbine. BlackRock, Inc. is currently the largest shareholder, with 10% of shares outstanding. For context, the second largest shareholder holds about 9.0% of the shares outstanding, followed by an ownership of 6.2% by the third-largest shareholder. Furthermore, CEO William Stone is the owner of 1.1% of the company's shares.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 18 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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 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.

We can report that insiders do own shares in Digital Turbine, Inc.. This is a big company, so it is good to see this level of alignment. Insiders own US$115m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

With a 25% 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

With a stake of 5.9%, private equity firms could influence the Digital Turbine board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Digital Turbine better, we need to consider many other factors. Case in point: We've spotted 6 warning signs for Digital Turbine you should be aware of, and 1 of them is concerning.

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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