What Is The Ownership Structure Like For Diageo plc (LON:DGE)?

Simply Wall St

Sat, Mar 26, 2022, 8:41 AM 4 min read

Every investor in Diageo plc (LON:DGE) should be aware of the most powerful shareholder groups. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. Companies that used to be publicly owned tend to have lower insider ownership.

Diageo has a market capitalization of UK£88b, so it's too big to fly under the radar. We'd expect to see both institutions and retail investors owning a portion of the company. In the chart below, we can see that institutional investors have bought into the company. Let's take a closer look to see what the different types of shareholders can tell us about Diageo.

Check out our latest analysis for Diageo

ownership-breakdown — LSE:DGE Ownership Breakdown March 26th 2022

What Does The Institutional Ownership Tell Us About Diageo?

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.

Diageo already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Diageo's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth — LSE:DGE Earnings and Revenue Growth March 26th 2022

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Diageo is not owned by hedge funds. BlackRock, Inc. is currently the largest shareholder, with 7.6% of shares outstanding. In comparison, the second and third largest shareholders hold about 4.0% and 2.4% of the stock.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

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 Diageo

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. 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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our information suggests that Diageo plc insiders own under 1% of the company. As it is a large company, we'd only expect insiders to own a small percentage of it. But it's worth noting that they own UK£75m worth of shares. Arguably recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 23% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

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. For example, we've discovered 1 warning sign for Diageo that you should be aware of before investing here.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.