WildBrain Ltd.’s (TSE:WILD) latest 13% decline adds to one-year losses, hedge funds investors may consider drastic measures

To get a sense of who is really in control of WildBrain Ltd. (TSE:WILD), it is important to understand the company’s ownership structure. We can see that hedge funds own the lion’s share of the company at 48%. In other words, the group will gain the most (or lose the most) from their investment in the company.

It follows that hedge fund investors were the hardest-hit group after the company’s market cap fell to CA$435 million last week after a 13% drop in its share price. The recent loss, which adds to a 17% one-year loss for shareholders, may not sit well with this group of investors. Hedge funds are often managed aggressively, usually with the goal of focusing on short-term gains. And because they have a significant interest in WildBrain, they have a lot of power, and if the company’s performance doesn’t improve, they could end up influencing management decisions that aren’t aligned with long-term goals.

In the graphic below, we zoom in on the different WildBrain ownership groups.

Check out our latest analysis for WildBrain

What Does Institutional Ownership Tell Us About WildBrain?

Institutional investors typically compare their own returns to the returns of a commonly tracked index. As such, they typically consider buying larger companies that are included in the relevant benchmark index.

We can see that WildBrain has institutional investors; and they hold a good portion of the company’s stock. This suggests some credibility among professional investors. But we can’t rely on that alone, as institutions sometimes make bad investments, just like everyone else. It’s not uncommon for the stock price to fall sharply when two large institutional investors attempt to sell a stock at the same time. So, it’s worth checking out WildBrain’s earnings history so far (below). Of course, keep in mind that there are other factors to consider as well.

It appears that 48% of WildBrain stock is controlled by hedge funds. This catches my attention because hedge funds sometimes try to influence management or enact changes that create value for shareholders in the short term. Fine Capital Partners, LP is currently the largest shareholder with 38% of the outstanding shares. EastBay Asset Management LLC is the second largest shareholder with 9.7% of the common stock and PRIMECAP Management Company holds approximately 3.8% of the company’s stock. In addition, CEO Eric Ellenbogen owns 1.1% of the company’s shares.

Upon further research, we found that the top 3 shareholders collectively control more than half of the company’s stock, meaning they have considerable power to influence company decisions.

Studying institutional ownership is a good way to gauge and filter a stock’s expected performance. The same can be done by studying analyst sentiment. There are many analysts covering the stock, so it might be worth seeing what they’re forecasting as well.

Insider ownership of WildBrain

The definition of corporate insider can be subjective and varies by jurisdiction. Our data reflects individual insiders and captures at least board members. Management runs the business, but the CEO is accountable to the board even if he or she is a member.

Most view insider ownership as a positive, as it can indicate that the board is well aligned with other shareholders. In some cases, however, too much power is concentrated within this group.

Shareholders would likely be interested to know that insiders own shares in WildBrain Ltd. own. Insiders own $19 million in stock in the $435 million company in their own name. It’s good to see some insider investments, but it might be worth checking to see if those insiders bought.

General Public Property

The general public — including retail investors — own 42% of the shares in the company, so it can’t be easily ignored. While this ownership may not be sufficient to sway a policy decision in their favor, they can still collectively influence company policy.

Next Steps:

While it’s worth considering the different groups that own a business, there are other factors that are even more important. For example, we discovered 3 warning signs for WildBrain (1 is potentially serious!) to consider before investing here.

But ultimately it is the future, not the past that determines how well the owners of this business will do. Therefore, we think it’s wise to take a look at this free report that shows whether analysts are predicting a brighter future.

Note: The figures in this article are calculated using data for the last twelve months, relating to the 12-month period ending on the last date of the month to which the financial statements are dated. This may not tally with the annual report figures for the full year.

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This Simply Wall St article is of a general nature. We provide comments based on historical data and analyst forecasts only 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 offer you 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.