adidas AG’s (ETR:ADS) latest 5.3% decline adds to one-year losses, institutional investors may consider drastic measures

Important Findings

  • Significantly high institutional ownership means that adidas stock price is sensitive to their trading activity
  • A total of 25 investors hold a 40% majority stake in the company
  • Analyst forecasts along with ownership data serve to provide an informed idea of ​​a company’s prospects

If you want to know who really controls adidas AG (ETR:ADS), you have to look at the composition of the share register. And the group holding the biggest piece of the pie are institutions with 53% ownership. This means that the group gains most when the stock goes up (or loses most when it goes down).

As a result, institutional investors suffered the heaviest losses last week after the market cap fell by €1.4 billion. Needless to say, the recent loss, compounding shareholders’ one-year loss of 10%, may not go down well with this category of shareholders in particular. Institutions, often referred to as “market makers,” wield significant power in influencing the price dynamics of any stock. Therefore, if the decline continues, institutional investors could be pressured to sell adidas, which could hurt individual investors.

In the graphic below we approach the different ownership groups of adidas.

Check out our latest analysis for adidas

XTRA:ADS ownership breakdown May 25, 2023

What does institutional ownership tell us about adidas?

Institutions typically measure themselves against a benchmark when reporting to their own investors. As a result, they’re often more enthusiastic about a stock once it’s included in a major index. We assume that most companies will have some institutions on the register, especially as they grow.

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adidas has already entered institutes in the share register. In fact, they own a respectable stake in the company. This can be an indication that the company has a certain level of credibility in the investment community. However, one should be careful not to rely on the supposed validation by institutional investors. Sometimes they get it wrong too. When multiple institutions own a stock, there is always a risk that they will find themselves in a “crowded trade.” If such a trade fails, multiple parties may compete to sell the shares quickly. This risk is higher in a company without a growth history. Below you can see adidas’ historic earnings and sales, but remember there’s always more to the story.

XTRA:ADS Earnings and Sales Growth May 25, 2023

Investors should note that institutions actually own more than half of the company, so collectively they can wield significant power. Hedge funds don’t hold many shares in adidas. Looking at our data, BlackRock, Inc. is the largest shareholder with 6.0% of shares outstanding. Flossbach von Storch AG is the second largest shareholder with 4.0% of the common stock and The Vanguard Group, Inc. owns approximately 3.8% of the company’s stock.

Our studies suggest that the top 25 shareholders collectively control less than half of the company’s stock, meaning the company’s shares are widespread and there is no dominant shareholder.

Researching institutional ownership is a good way to gauge and filter a stock’s expected performance. The same can be accomplished by examining analyst sentiment. There are a significant number of analysts covering the stock, so it might be helpful to know their overall views going forward.

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Insider ownership of adidas

The definition of an insider may vary slightly from country to country, but board members always count. Management ultimately reports to the board of directors. However, it is not uncommon for managers to also be board members, especially when they are founders or CEOs.

In general, I think insider ownership is a good thing. In some cases, however, it becomes more difficult for other shareholders to hold the board accountable for decisions.

Our data cannot confirm that directors personally hold shares. Not all jurisdictions have the same rules for insider ownership disclosures, and it’s possible we’ve missed something here. Click here to learn more about the CEO.

General Public Property

The general public — including individual investors — own a 47% stake in the company, so it simply can’t be ignored. While this group isn’t necessarily in charge, it can certainly have a real impact on how the company is run.

Next Steps:

I find it very interesting to see who exactly owns a company. But to get real insights, we need to consider other information as well. For example, consider the ever-present specter of investment risk. We have identified 1 warning sign with adidas and understanding them should be part of your investment process.

Ultimately The future is the most important thing. You can access this free Report on analysts’ forecasts for the company.

Note: The figures in this article are calculated using data for the last twelve months, relating to the twelve-month period ending on the last day of the month in which the financial statements are dated. This may not tally with the figures in the annual report for the full year.

This Simply Wall St article is of a general nature. We provide commentary based on historical data and analyst forecasts solely using an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your goals or financial situation. Our goal is to provide you with long-term focused analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.


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