Yahoo Finance Institutional investors may adopt severe steps after MicroStrategy Incorporated's (NASDAQ:MSTR) latest 15% drop adds to a year losses
A look at the shareholders of MicroStrategy Incorporated (NASDAQ:MSTR) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 58% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
As a result, institutional investors endured the highest losses last week after market cap fell by US$407m. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 68% for shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in MicroStrategy's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.
Let's take a closer look to see what the different types of shareholders can tell us about MicroStrategy.
Check out our latest analysis for MicroStrategy
What Does The Institutional Ownership Tell Us About MicroStrategy?
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.
MicroStrategy already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 MicroStrategy, (below). Of course, keep in mind that there are other factors to consider, too.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. MicroStrategy is not owned by hedge funds. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In MicroStrategy's case, its Top Key Executive, Michael Saylor, is the largest shareholder, holding 17% of shares outstanding. Capital Research and Management Company is the second largest shareholder owning 15% of common stock, and The Vanguard Group, Inc. holds about 7.9% of the company stock.
We did some more digging and found that 6 of the top shareholders account for roughly 52% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of MicroStrategy
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. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our information suggests that insiders maintain a significant holding in MicroStrategy Incorporated. It has a market capitalization of just US$2.3b, and insiders have US$403m worth of shares in their own names. That's quite significant. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.
General Public Ownership
The general public, who are usually individual investors, hold a 24% stake in MicroStrategy. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand MicroStrategy better, we need to consider many other factors. Case in point: We've spotted 5 warning signs for MicroStrategy you should be aware of.
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.
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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