In the wake of Conduent Incorporated's (NASDAQ:CNDT) latest US$120m market cap drop, institutional owners may be forced to take severe actions
Key Insights
Institutions' substantial holdings in Conduent implies that they have significant influence over the company's share price
The top 7 shareholders own 51% of the company
Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock
A look at the shareholders of Conduent Incorporated (NASDAQ:CNDT) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 78% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
And institutional investors endured the highest losses after the company's share price fell by 16% last week. The recent loss, which adds to a one-year loss of 35% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in Conduent'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 Conduent, beginning with the chart below.
See our latest analysis for Conduent
What Does The Institutional Ownership Tell Us About Conduent?
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 Conduent. 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 Conduent's earnings history below. Of course, the future is what really matters.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Conduent. The company's largest shareholder is Icahn Capital LP, with ownership of 17%. The Vanguard Group, Inc. is the second largest shareholder owning 8.6% of common stock, and BlackRock, Inc. holds about 7.7% of the company stock. Additionally, the company's CEO Clifford Skelton directly holds 1.6% of the total shares outstanding.
We did some more digging and found that 7 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.
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 is some analyst coverage of the stock, but it could still become more well known, with time.
Insider Ownership Of Conduent
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.
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.
We can report that insiders do own shares in Conduent Incorporated. It has a market capitalization of just US$647m, and insiders have US$38m worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.
General Public Ownership
The general public, who are usually individual investors, hold a 16% stake in Conduent. 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.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Conduent better, we need to consider many other factors.
I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.
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.
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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.
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