A look at the shareholders of Netflix, Inc. (NASDAQ:NFLX) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 77% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Given the vast amount of money and research capacities at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.
In the chart below, we zoom in on the different ownership groups of Netflix.
What Does The Institutional Ownership Tell Us About Netflix?
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 Netflix does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Netflix, (below). Of course, keep in mind that there are other factors to consider, too.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Netflix is not owned by hedge funds. Our data shows that Capital Research and Management Company is the largest shareholder with 9.2% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.8% and 6.3% of the stock. Furthermore, CEO Wilmot Hastings is the owner of 1.2% 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 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 Netflix
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.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
We can report that insiders do own shares in Netflix, Inc.. Insiders own US$1.3b worth of shares (at current prices). It is good to see this level of investment. You can check here to see if those insiders have been buying recently.
General Public Ownership
With a 21% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Netflix. 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.
It's always worth thinking about the different groups who own shares in a company. But to understand Netflix better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Netflix 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.
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