Digimarc Corporation's (NASDAQ:DMRC) recent 13% pullback adds to one-year year losses, institutional owners may take drastic measures

Key Insights

• Given the large stake in the stock by institutions, Digimarc's stock price might be vulnerable to their trading decisions
• 51% of the business is held by the top 6 shareholders
• 24% of Digimarc is held by insiders

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A look at the shareholders of Digimarc Corporation (NASDAQ:DMRC) can tell us which group is most powerful. With 52% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And institutional investors saw their holdings value drop by 13% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 79% for shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the downtrend continues, institutions may face pressures to sell Digimarc, which might have negative implications on individual investors.

In the chart below, we zoom in on the different ownership groups of Digimarc.

See our latest analysis for Digimarc

What Does The Institutional Ownership Tell Us About Digimarc?

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.

We can see that Digimarc does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Digimarc, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Our data indicates that hedge funds own 13% of Digimarc. 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 Altai Capital Management, L.P. with 13% of shares outstanding. With 11% and 10% of the shares outstanding respectively, Riley McCormack and Vincent Smith are the second and third largest shareholders. Riley McCormack, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

We did some more digging and found that 6 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Digimarc

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 a reasonable proportion of Digimarc Corporation. It has a market capitalization of just US$173m, and insiders have US$41m worth of shares in their own names. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

With a 11% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Digimarc. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Digimarc better, we need to consider many other factors. For instance, we've identified 2 warning signs for Digimarc (1 is a bit concerning) that you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.