Following Digital Turbine, Inc.’s (NASDAQ:APPS) latest market capitalization drop of US$236 million, institutional owners may be forced to take tough action

If you want to know who really controls Digital Turbine, Inc. (NASDAQ:APPS), then you’ll need to look at the composition of its stock register. And the group that holds the biggest slice of the pie are institutions with 69% ownership. That is, the group will benefit the most if the stock goes up (or lose the most if there is a downturn).

It follows that institutional investors were the hardest hit group after the company’s market capitalization fell to $1.6 billion last week following a 13% decline in the share price. Needless to say, the recent loss on top of a year-long loss for 75% shareholders might not go over well, especially with this category of shareholders. Often referred to as “market makers,” institutions wield significant power in influencing the price dynamics of any stock. Therefore, if the decline continues, institutional investors may be forced to sell Digital Turbine, which could harm individual investors.

Let’s take a closer look at what different types of shareholders can tell us about Digital Turbine.

Before looking at the breakdown of owners, note that our analysis indicates that APPS is potentially undervalued!

NasdaqCM: APPS Ownership Breakdown September 18, 2022

What does institutional ownership tell us about Digital Turbine?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it is included in a major index. We would expect most companies to have some institutions listed, especially if they are growing.

Digital Turbine already has institutions on the share register. Indeed, they hold a respectable stake in the company. This may indicate that the company has some degree of credibility in the investment community. However, it is best to be wary of relying on the so-called validation that accompanies institutional investors. They are also sometimes wrong. If multiple institutions change their minds on a stock at the same time, you could see the stock price drop quickly. So it’s worth checking out Digital Turbine’s earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
NasdaqCM: APPS Earnings and Revenue Growth September 18, 2022

Investors should note that institutions actually own more than half of the company, so they can collectively wield significant power. Hedge funds don’t have a lot of shares in Digital Turbine. BlackRock, Inc. is currently the company’s largest shareholder with 14% of the shares outstanding. In comparison, the second and third shareholders hold around 10% and 6.1% of the shares. Additionally, the company’s CEO, William Stone, directly owns 1.6% of the total shares outstanding.

Looking at the shareholder register, we can see that 50% of the ownership is controlled by the top 15 shareholders, which means that no shareholder has a controlling interest in the ownership.

Institutional ownership research is a good way to assess and filter the expected performance of a stock. The same can be obtained by studying the feelings of the analyst. There are a reasonable number of analysts covering the stock, so it might be useful to know their overall view on the future.

Insider ownership of Digital Turbine

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The management of the company answers to the board of directors and the latter must represent the interests of the shareholders. In particular, sometimes the senior executives themselves sit on the board of directors.

I generally consider insider ownership to be a good thing. However, there are times when it is more difficult for other shareholders to hold the board accountable for decisions.

Shareholders would likely be interested to hear that insiders hold stock in Digital Turbine, Inc. It’s a big company, so it’s good to see that level of alignment. Insiders hold $62 million worth of stock (at current prices). Most would say this shows the alignment of interests between shareholders and the board. Still, it might be worth checking to see if these insiders have sold.

General public property

With a 21% stake, the general public, consisting mostly of individual investors, has some influence over Digital Turbine. Although this group may not necessarily make the decisions, they can certainly have a real influence on the way the business is run.

Private equity ownership

The private equity firms hold a 6.1% stake in Digital Turbine. This suggests that they can influence key policy decisions. Some investors might be encouraged by this, as private equity is sometimes able to encourage strategies that help the market see the value of the company. Alternatively, these holders could exit the investment after making it public.

Next steps:

I find it very interesting to see who exactly owns a company. But to really get insight, we also need to consider other information. For example, we have identified 5 warning signs for Digital Turbine of which you should be aware.

But finally it’s the future, not the past, which will determine the performance of the owners of this company. Therefore, we think it’s advisable to take a look at this free report showing whether analysts are predicting a brighter future.

NB: The figures in this article are calculated using trailing twelve month data, which refers to the 12 month period ending on the last day of the month the financial statements are dated. This may not be consistent with the annual report figures for the full year.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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Lance B. Holton