In the wake of WW International, Inc.'s (NASDAQ:WW) latest US$43m market cap drop, institutional owners may be forced to take severe actions

WEIGHTWATCHERS INTERNATIONAL INC -3.72%

WEIGHTWATCHERS INTERNATIONAL INC

WW

1.81

-3.72%

Key Insights

  • Institutions' substantial holdings in WW International implies that they have significant influence over the company's share price
  • The top 15 shareholders own 52% of the company
  • Insiders have been selling lately

To get a sense of who is truly in control of WW International, Inc. (NASDAQ:WW), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 74% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors saw their holdings value drop by 12% last week. The recent loss, which adds to a one-year loss of 9.6% for stockholders, may not sit well with this group of investors. 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 WW International which might hurt individual investors.

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

Check out our latest analysis for WW International

ownership-breakdown
NasdaqGS:WW Ownership Breakdown January 30th 2024

What Does The Institutional Ownership Tell Us About WW International?

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

earnings-and-revenue-growth
NasdaqGS:WW Earnings and Revenue Growth January 30th 2024

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. It looks like hedge funds own 6.6% of WW International shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Contrarius Investment Management Ltd. is currently the company's largest shareholder with 6.7% of shares outstanding. In comparison, the second and third largest shareholders hold about 6.6% and 5.4% of the stock.

After doing some more digging, we found that the top 15 have the combined ownership of 52% in the company, suggesting that no single shareholder has significant control over the company.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of WW International

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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 some shares in WW International, Inc.. It has a market capitalization of just US$345m, and insiders have US$9.7m worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 17% stake in the company, and hence can't easily be ignored. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should learn about the 4 warning signs we've spotted with WW International (including 1 which is a bit unpleasant) .

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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