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Could ServiceSource International, Inc.'s (NASDAQ:SREV) Investor Composition Influence The Stock Price?

Simply Wall St

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A look at the shareholders of ServiceSource International, Inc. (NASDAQ:SREV) can tell us which group is most powerful. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. Companies that have been privatized tend to have low insider ownership.

ServiceSource International is a smaller company with a market capitalization of US$92m, so it may still be flying under the radar of many institutional investors. Taking a look at our data on the ownership groups (below), it's seems that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about SREV.

Check out our latest analysis for ServiceSource International

NasdaqGS:SREV Ownership Summary, July 15th 2019

What Does The Institutional Ownership Tell Us About ServiceSource International?

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 own 53% of ServiceSource International. 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 ServiceSource International's historic earnings and revenue, below, but keep in mind there's always more to the story.

NasdaqGS:SREV Income Statement, July 15th 2019

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. It looks like hedge funds own 21% of ServiceSource International shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of ServiceSource International

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

We can see that insiders own shares in ServiceSource International, Inc.. As individuals, the insiders collectively own US$3.1m worth of the US$92m company. This shows at least some alignment, but I usually like to see larger insider holdings. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 17% ownership, the general public have some degree of sway over SREV. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With a stake of 6.3%, private equity firms could influence the SREV board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow .

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.