Yahoo Finance Shopify Inc.'s (NYSE:SHOP) institutional investors lost 4.2% last week but have benefitted from longer-term gains
Key Insights
Institutions' substantial holdings in Shopify implies that they have significant influence over the company's share price
A total of 25 investors have a majority stake in the company with 49% ownership
To get a sense of who is truly in control of Shopify Inc. (NYSE:SHOP), it is important to understand the ownership structure of the business. With 64% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
Losing money on investments is something no shareholder enjoys, least of all institutional investors who saw their holdings value drop by 4.2% last week. Still, the 76% one-year gains may have helped mitigate their overall losses. We would assume however, that they would be on the lookout for weakness in the future.
In the chart below, we zoom in on the different ownership groups of Shopify.
Check out our latest analysis for Shopify
What Does The Institutional Ownership Tell Us About Shopify?
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.
Shopify 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 Shopify, (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. Hedge funds don't have many shares in Shopify. Capital Research and Management Company is currently the company's largest shareholder with 8.3% of shares outstanding. With 6.2% and 5.6% of the shares outstanding respectively, Tobias Lütke and Baillie Gifford & Co. are the second and third largest shareholders. Tobias Lütke, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.
Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.
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 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 Shopify
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. 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 report that insiders do own shares in Shopify Inc.. It is a very large company, and board members collectively own US$5.3b worth of shares (at current prices). Most would say this shows a good 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 30% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Shopify. 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:
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too.
I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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.
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