Positive week for PENN Entertainment, Inc. (NASDAQ:PENN) institutional investors who lost 20% over the past year

Key Insights

• Institutions’ substantial holdings in PENN Entertainment implies that they have significant influence over the company’s share price
• A total of 7 investors have a majority stake in the company with 51% ownership
• Recent purchases by insiders

If you want to know who really controls PENN Entertainment, Inc. (NASDAQ:PENN), then you’ll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 76% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Last week’s US$283m market cap gain would probably be appreciated by institutional investors, especially after a year of 20% losses.

In the chart below, we zoom in on the different ownership groups of PENN Entertainment.

View our latest analysis for PENN Entertainment

What Does The Institutional Ownership Tell Us About PENN Entertainment?

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.

As you can see, institutional investors have a fair amount of stake in PENN Entertainment. 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 PENN Entertainment’s historic earnings and revenue below, but keep in mind there’s always more to the story.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. It looks like hedge funds own 9.7% of PENN Entertainment shares. That’s interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. FMR LLC is currently the largest shareholder, with 12% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 10% and 9.7%, of the shares outstanding, respectively.

We also observed that the top 7 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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 PENN Entertainment

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

Our most recent data indicates that insiders own less than 1% of PENN Entertainment, Inc.. It’s a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own US$29m 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

With a 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over PENN Entertainment. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand PENN Entertainment better, we need to consider many other factors. Take risks for example – PENN Entertainment has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

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

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.