Yahoo Finance Institutional owners may consider drastic measures as Lyft, Inc.'s (NASDAQ:LYFT) recent US$282m drop adds to long-term losses
Key Insights
Significantly high institutional ownership implies Lyft's stock price is sensitive to their trading actions
50% of the business is held by the top 14 shareholders
A look at the shareholders of Lyft, Inc. (NASDAQ:LYFT) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 74% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
As a result, institutional investors endured the highest losses last week after market cap fell by US$282m. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 37% for shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell Lyft which might hurt individual investors.
Let's delve deeper into each type of owner of Lyft, beginning with the chart below.
Check out our latest analysis for Lyft
What Does The Institutional Ownership Tell Us About Lyft?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
As you can see, institutional investors have a fair amount of stake in Lyft. 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 Lyft, (below). Of course, keep in mind that there are other factors to consider, too.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Lyft. FMR LLC is currently the company's largest shareholder with 14% of shares outstanding. In comparison, the second and third largest shareholders hold about 8.1% and 7.9% of the stock.
After doing some more digging, we found that the top 14 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Lyft
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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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.
We can see that insiders own shares in Lyft, Inc.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around US$119m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.
General Public Ownership
With a 15% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Lyft. 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.
Public Company Ownership
Public companies currently own 8.1% of Lyft stock. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Lyft you should be aware of.
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.
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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.
