Institutional owners may consider drastic measures as DocuSign, Inc.'s (NASDAQ:DOCU) recent US$316m drop adds to long-term losses

Key Insights

• Institutions' substantial holdings in DocuSign implies that they have significant influence over the company's share price

• A total of 25 investors have a majority stake in the company with 51% ownership

• Insiders have sold recently

A look at the shareholders of DocuSign, Inc. (NASDAQ:DOCU) can tell us which group is most powerful. With 77% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And institutional investors endured the highest losses after the company's share price fell by 3.2% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 41% for shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the decline continues, institutional investors may be pressured to sell DocuSign which might hurt individual investors.

Let's delve deeper into each type of owner of DocuSign, beginning with the chart below.

Check out our latest analysis for DocuSign

ownership-breakdown

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.

We can see that DocuSign does have institutional investors; and they hold a good portion of the company's stock. 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 DocuSign's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in DocuSign. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 9.4% of shares outstanding. For context, the second largest shareholder holds about 6.6% of the shares outstanding, followed by an ownership of 4.1% by the third-largest shareholder.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 25 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of DocuSign

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

Shareholders would probably be interested to learn that insiders own shares in DocuSign, Inc.. The insiders have a meaningful stake worth US$110m. we sometimes take an interest in whether they have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 21% stake in the company, and hence can't easily be ignored. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand DocuSign better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with DocuSign .

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.

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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