After losing 17% in the past year, Block, Inc. (NYSE:SQ) institutional owners must be relieved by the recent gain
Key Insights
Significantly high institutional ownership implies Block's stock price is sensitive to their trading actions
The top 25 shareholders own 50% of the company
A look at the shareholders of Block, Inc. (NYSE:SQ) can tell us which group is most powerful. The group holding the most number of shares in the company, around 63% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
After a year of 17% losses, last week’s 7.6% gain would be welcomed by institutional investors as a likely sign that returns might start trending higher.
In the chart below, we zoom in on the different ownership groups of Block.
Check out our latest analysis for Block
What Does The Institutional Ownership Tell Us About Block?
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.
Block already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Block'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. Block is not owned by hedge funds. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In Block's case, its President, Jack Dorsey, is the largest shareholder, holding 8.1% of shares outstanding. For context, the second largest shareholder holds about 5.8% of the shares outstanding, followed by an ownership of 4.2% by the third-largest shareholder.
A closer look at our ownership figures suggests that the top 25 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 Block
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.
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.
Our most recent data indicates that insiders own a reasonable proportion of Block, Inc.. It is very interesting to see that insiders have a meaningful US$5.3b stake in this US$49b business. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.
General Public Ownership
With a 26% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Block. 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:
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. Be aware that Block is showing 2 warning signs in our investment analysis , you should know about...
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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