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Institutional Investors May Adopt Severe Steps After 23andMe Holding Co.'s (NASDAQ:ME) Latest 9.2% Drop Adds to a Year Losses

Simply Wall St ·  {{timeTz}}

To get a sense of who is truly in control of 23andMe Holding Co. (NASDAQ:ME), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 34% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$1.3b last week after a 9.2% drop in the share price. The recent loss, which adds to a one-year loss of 70% 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 23andMe Holding which might hurt individual investors.

In the chart below, we zoom in on the different ownership groups of 23andMe Holding.

Check out our latest analysis for 23andMe Holding

ownership-breakdownNasdaqGS:ME Ownership Breakdown September 26th 2022

What Does The Institutional Ownership Tell Us About 23andMe Holding?

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.

As you can see, institutional investors have a fair amount of stake in 23andMe Holding. 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. 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 23andMe Holding's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growthNasdaqGS:ME Earnings and Revenue Growth September 26th 2022

23andMe Holding is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is the CEO Anne Wojcicki with 22% of shares outstanding. With 8.8% and 5.8% of the shares outstanding respectively, GSK plc and G Squared Equity Management LP are the second and third largest shareholders.

On further inspection, we found that more than half the company's shares are owned by the top 6 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 23andMe Holding

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

It seems insiders own a significant proportion of 23andMe Holding Co.. It is very interesting to see that insiders have a meaningful US$286m stake in this US$1.3b business. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

With a 28% ownership, the general public, mostly comprising of individual investors, have some degree of sway over 23andMe Holding. 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.

Private Equity Ownership

With a stake of 5.8%, private equity firms could influence the 23andMe Holding board. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Public Company Ownership

We can see that public companies hold 8.8% of the 23andMe Holding shares on issue. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

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. Case in point: We've spotted 4 warning signs for 23andMe Holding you should be aware of, and 1 of them is significant.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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