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Institutional investors may adopt severe steps after iHeartMedia, Inc.'s (NASDAQ:IHRT) latest 18% drop adds to a year losses

Key Insights

  • Given the large stake in the stock by institutions, iHeartMedia's stock price might be vulnerable to their trading decisions

  • The top 8 shareholders own 51% of the company

  • Insiders have bought recently

If you want to know who really controls iHeartMedia, Inc. (NASDAQ:IHRT), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 79% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And institutional investors endured the highest losses after the company's share price fell by 18% last week. The recent loss, which adds to a one-year loss of 79% for stockholders, may not sit well with this group of investors. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the downtrend continues, institutions may face pressures to sell iHeartMedia, which might have negative implications on individual investors.

Let's take a closer look to see what the different types of shareholders can tell us about iHeartMedia.

View our latest analysis for iHeartMedia

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About iHeartMedia?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

iHeartMedia 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of iHeartMedia, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
earnings-and-revenue-growth

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in iHeartMedia. The company's largest shareholder is Pacific Investment Management Company LLC, with ownership of 17%. Meanwhile, the second and third largest shareholders, hold 12% and 7.5%, of the shares outstanding, respectively. In addition, we found that Robert Pittman, the CEO has 0.7% of the shares allocated to their name.

We did some more digging and found that 8 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of iHeartMedia

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

Shareholders would probably be interested to learn that insiders own shares in iHeartMedia, Inc.. In their own names, insiders own US$4.9m worth of stock in the US$330m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 20% stake in iHeartMedia. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand iHeartMedia better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for iHeartMedia (of which 1 is potentially serious!) you should know about.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.

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