Institutional investors may adopt severe steps after Groupon, Inc.'s (NASDAQ:GRPN) latest 13% drop adds to a year losses
If you want to know who really controls Groupon, Inc. (NASDAQ:GRPN), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 45% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
And institutional investors endured the highest losses after the company's share price fell by 13% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 72% might not go down well especially with this category of shareholders. Often called “market makers”, institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in Groupon's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.
Let's delve deeper into each type of owner of Groupon, beginning with the chart below.
View our latest analysis for Groupon
What Does The Institutional Ownership Tell Us About Groupon?
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 Groupon. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Groupon's earnings history below. Of course, the future is what really matters.
It looks like hedge funds own 5.1% of Groupon shares. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Looking at our data, we can see that the largest shareholder is Pale Fire Capital SE with 22% of shares outstanding. Eric Lefkofsky is the second largest shareholder owning 13% of common stock, and RPD Fund Management LLC holds about 5.1% of the company stock. Eric Lefkofsky, who is the second-largest shareholder, also happens to hold the title of Top Key Executive. Additionally, the company's CEO Kedar Deshpande directly holds 0.5% of the total shares outstanding.
Our research also brought to light the fact that roughly 50% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. 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 Groupon
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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.
Our most recent data indicates that insiders own a reasonable proportion of Groupon, Inc.. Insiders have a US$34m stake in this US$216m business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.
General Public Ownership
The general public-- including retail investors -- own 12% 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.
Private Equity Ownership
With an ownership of 22%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.
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 for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Groupon , and understanding them should be part of your investment process.
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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