With 59% ownership in AvidXchange Holdings, Inc. (NASDAQ:AVDX), institutional investors have a lot riding on the business
Key Insights
Institutions' substantial holdings in AvidXchange Holdings implies that they have significant influence over the company's share price
51% of the business is held by the top 14 shareholders
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
Every investor in AvidXchange Holdings, Inc. (NASDAQ:AVDX) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 59% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
And as as result, institutional investors reaped the most rewards after the company's stock price gained 15% last week. The one-year return on investment is currently 13% and last week's gain would have been more than welcomed.
In the chart below, we zoom in on the different ownership groups of AvidXchange Holdings.
See our latest analysis for AvidXchange Holdings
What Does The Institutional Ownership Tell Us About AvidXchange Holdings?
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.
We can see that AvidXchange Holdings does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 AvidXchange Holdings' historic earnings and revenue below, but keep in mind there's always more to the story.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. AvidXchange Holdings is not owned by hedge funds. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 7.3%. Bain Capital, LP is the second largest shareholder owning 7.0% of common stock, and Michael Praeger holds about 6.9% of the company stock. Michael Praeger, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.
Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 14 shareholders, meaning that no single shareholder has a majority interest in the ownership.
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 AvidXchange Holdings
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.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
We can see that insiders own shares in AvidXchange Holdings, Inc.. The insiders have a meaningful stake worth US$187m. Most would see this as a real positive. If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.
General Public Ownership
The general public, who are usually individual investors, hold a 21% stake in AvidXchange Holdings. 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.
Private Equity Ownership
Private equity firms hold a 7.0% stake in AvidXchange Holdings. This suggests they can be influential in key policy decisions. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.
Private Company Ownership
It seems that Private Companies own 4.6%, of the AvidXchange Holdings stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for AvidXchange Holdings you should know about.
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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