Institutional investors in PDF Solutions, Inc. (NASDAQ:PDFS) lost 18% last week but have reaped the benefits of longer-term growth
Key Insights
Given the large stake in the stock by institutions, PDF Solutions' stock price might be vulnerable to their trading decisions
A total of 8 investors have a majority stake in the company with 52% ownership
To get a sense of who is truly in control of PDF Solutions, Inc. (NASDAQ:PDFS), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 69% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Institutional investors endured the highest losses after the company's market cap fell by US$283m last week. However, the 32% one-year return to shareholders may have helped lessen their pain. But they would probably be wary of future losses.
Let's take a closer look to see what the different types of shareholders can tell us about PDF Solutions.
See our latest analysis for PDF Solutions
What Does The Institutional Ownership Tell Us About PDF Solutions?
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 PDF Solutions. 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. 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 PDF Solutions' 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. PDF Solutions is not owned by hedge funds. BlackRock, Inc. is currently the company's largest shareholder with 12% of shares outstanding. In comparison, the second and third largest shareholders hold about 8.7% and 8.1% of the stock.
We did some more digging and found that 8 of the top shareholders account for roughly 52% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.
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 PDF Solutions
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. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
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 most recent data indicates that insiders own a reasonable proportion of PDF Solutions, Inc.. It is very interesting to see that insiders have a meaningful US$156m stake in this US$1.4b business. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public, who are usually individual investors, hold a 10% stake in PDF Solutions. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
Public Company Ownership
It appears to us that public companies own 8.7% of PDF Solutions. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand PDF Solutions better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for PDF Solutions you should be aware of.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.
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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.
