Given the large stake in the stock by institutions, DocuSign’s stock price might be vulnerable to their trading decisions
50% of the business is held by the top 21 shareholders
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
A look at the shareholders of DocuSign, Inc. (NASDAQ:DOCU) can tell us which group is most powerful. We can see that institutions own the lion’s share in the company with 79% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.
Let’s take a closer look to see what the different types of shareholders can tell us about DocuSign.
See our latest analysis for DocuSign
What Does The Institutional Ownership Tell Us About DocuSign?
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.
DocuSign 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 DocuSign, (below). Of course, keep in mind that there are other factors to consider, too.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don’t have many shares in DocuSign. The Vanguard Group, Inc. is currently the company’s largest shareholder with 10% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 6.1% and 4.5%, of the shares outstanding, respectively.
A closer look at our ownership figures suggests that the top 21 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.
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 DocuSign
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
Our information suggests that DocuSign, Inc. insiders own under 1% of the company. As it is a large company, we’d only expect insiders to own a small percentage of it. But it’s worth noting that they own US$84m worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
The general public– including retail investors — own 20% stake in the company, and hence can’t easily be ignored. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.
While it is well worth considering the different groups that own a company, there are other factors that are even more important.
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.
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.