Institutions' substantial holdings in International Business Machines implies that they have significant influence over the company's share price
The top 25 shareholders own 38% of the company
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
Every investor in International Business Machines Corporation (NYSE:IBM) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 57% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.
Let's delve deeper into each type of owner of International Business Machines, beginning with the chart below.
What Does The Institutional Ownership Tell Us About International Business Machines?
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.
We can see that International Business Machines does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see International Business Machines' historic earnings and revenue below, but keep in mind there's always more to the story.
NYSE:IBM Earnings and Revenue Growth June 10th 2023
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. International Business Machines is not owned by hedge funds. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 8.9% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 7.9% of common stock, and State Street Global Advisors, Inc. holds about 5.9% of the company stock.
On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of International Business Machines
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
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 data suggests that insiders own under 1% of International Business Machines Corporation in their own names. It is a very large company, so it would be surprising to see insiders own a large proportion of the company. Though their holding amounts to less than 1%, we can see that board members collectively own US$87m worth of shares (at current prices). In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.
General Public Ownership
With a 43% ownership, the general public, mostly comprising of individual investors, have some degree of sway over International Business Machines. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
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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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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