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In order to understand who really controls Western Digital Corporation (NASDAQ:WDC), it’s important to understand the ownership structure of the business. With an 88% stake, the institutions hold the most stake in the company. In other words, the group should gain (or lose) the most from its investment in the company.

And institutional investors suffered the biggest losses after the company’s share price fell 11% last week. This group of investors may be particularly concerned about the current loss, which adds 44% to the one-year loss for shareholders. Often called “market makers,” institutions have considerable power in influencing the price dynamics of any stock. Therefore, if Western Digital’s share price weakness continues, institutional investors may feel pressured to sell shares, which may not be ideal for individual investors.

Let’s dive deeper into each type of Western Digital owner, starting with the chart below.

Check out our latest analysis for Western Digital

NasdaqGS:WDC ownership distribution on December 18, 2022

What does institutional ownership tell us about Western Digital?

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

Western Digital already has facilities in the share registry. Indeed, they have a respectable stake in the company. This can indicate that the company has some credibility in the investment community. However, it is best to be careful when relying on the implied validation that comes with institutional investors. They are also sometimes wrong. When several institutions own a stock, there is always the risk that they are in a “crowded trade”. When such a trade goes wrong, multiple parties may compete to sell the shares quickly. This risk is higher in a company without a history of growth. You can see Western Digital’s historical revenue and earnings below, but remember there’s always more to the story.

revenue and earnings growth
NasdaqGS:WDC Earnings and Earnings Growth for December 18, 2022

Investors should note that the institutions actually own more than half of the company, so together they can wield considerable power. We note that hedge funds do not have meaningful investments in Western Digital. The Vanguard Group, Inc. is currently the company’s largest shareholder with a 12% stake. BlackRock, Inc. is the second largest shareholder, owning 7.9% of the common stock, and State Street Global Advisors, Inc. owns about 3.9% of the company’s shares.

Looking at the shareholder register, we can see that 50% of the ownership is controlled by the top 16 shareholders, meaning that no one shareholder has a majority interest in the ownership.

Institutional ownership research is a good way to measure and filter the expected performance of stocks. The same can be achieved by studying analyst sentiment. Quite a few analysts cover the stock, so you can easily see a bullish forecast.

Western Digital proprietary

While the exact definition of an insider can be subjective, almost everyone considers board members to be insiders. The management of the company runs the business, but the CEO will answer to the board even if he is a member of it.

Insider ownership is positive when it signals that management thinks like the real owners of the company. However, high insider ownership can also give enormous power to a small group within a company. This can be a negative in some circumstances.

Our data shows that insiders own more than 1% of Western Digital Corporation in their own name. It’s a very large company, so it would be surprising to see insiders own a large portion of the company. Although their holdings are less than 1%, we can see that the board members collectively hold $40 million worth of shares (at current prices). In a situation like this, it might be more interesting to see if those insiders are buying or selling.

Common public property

The general public, typically individual investors, owns 12% of Western Digital. This amount of ownership, although significant, may not be sufficient to change company policy if the decision is not synchronized with other major shareholders.

Next steps.

It’s always worth thinking about the different groups who own shares in the company. But to better understand Western Digital, we need to consider many other factors. For example, we have discovered 2 Warning Signs for Western Digital (1 should not be ignored) that you should be aware of.

If you prefer to discover what analysts are predicting in terms of future growth, don’t miss this free of charge report on analysts’ forecasts.

Note: The figures in this article are calculated using data for the last twelve months covering the 12-month period ending on the last day of the month in which the financial statement is dated. This may not correspond to the figures in the annual report for the full year.

Valuation is complicated, but we help make it simple.

Find out if Western Digital can be over or under rated by checking out our comprehensive analysis which includes fair value estimates, risks and caveats, dividends, insider trading and financial health.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your goals or your financial situation. We aim to provide you with long-term focused analysis based on fundamental data. Note that our analysis may not take into account recent price-sensitive company announcements or quality materials. Simply Wall St has no position in the listed stocks.


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