The big shareholder groups in Netflix, Inc. (NASDAQ:NFLX) have power over the company. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of smaller companies. Companies that used to be publicly owned tend to have lower insider ownership.
Netflix is a pretty big company. It has a market capitalization of US$167b. Normally institutions would own a significant portion of a company this size. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. Let’s take a closer look to see what the different types of shareholders can tell us about Netflix.
What Does The Institutional Ownership Tell Us About Netflix?
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.
Netflix already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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.
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 Netflix. Looking at our data, we can see that the largest shareholder is Capital Research and Management Company with 13% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.6% and 6.6% of the stock. Additionally, the company’s CEO Wilmot Hastings directly holds 1.2% of the total shares outstanding.
A closer look at our ownership figures suggests that the top 15 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Netflix
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 see that insiders own shares in Netflix, Inc.. Insiders own US$2.2b worth of shares (at current prices). Most would say this shows a good alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.
General Public Ownership
The general public, who are usually individual investors, hold a 16% stake in 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. To that end, you should learn about the 3 warning signs we’ve spotted with Netflix (including 2 which make us uncomfortable) .
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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.