Yahoo Finance Institutional owners may take dramatic actions as Lemonade, Inc.'s (NYSE:LMND) recent 9.0% drop adds to one-year losses
Key Insights
Given the large stake in the stock by institutions, Lemonade's stock price might be vulnerable to their trading decisions
A total of 10 investors have a majority stake in the company with 51% ownership
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
A look at the shareholders of Lemonade, Inc. (NYSE:LMND) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 58% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$807m last week after a 9.0% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 48% might not go down well especially with this category of 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 Lemonade which might hurt individual investors.
Let's delve deeper into each type of owner of Lemonade, beginning with the chart below.
View our latest analysis for Lemonade
What Does The Institutional Ownership Tell Us About Lemonade?
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 Lemonade. 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. 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 Lemonade's historic earnings and revenue below, but keep in mind there's always more to the story.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Lemonade is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is SoftBank Group Corp., Asset Management Arm with 17% of shares outstanding. The Vanguard Group, Inc. is the second largest shareholder owning 8.2% of common stock, and Baillie Gifford & Co. holds about 6.8% of the company stock.
We also observed that the top 10 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Lemonade
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
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 Lemonade, Inc.. It has a market capitalization of just US$807m, and insiders have US$44m worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.
General Public Ownership
With a 35% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Lemonade. 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 Lemonade better, we need to consider many other factors. For example, we've discovered 1 warning sign for Lemonade that you should be aware of before investing here.
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.
