Zoom Video Communications, Inc.'s (NASDAQ:ZM) latest 6.4% decline adds to one-year losses, institutional investors may consider drastic measures
If you want to know who really controls Zoom Video Communications, Inc. (NASDAQ:ZM), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 55% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$19b last week after a 6.4% drop in the share price. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 64% 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. Hence, if weakness in Zoom Video Communications' 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 Zoom Video Communications, beginning with the chart below.
View our latest analysis for Zoom Video Communications
What Does The Institutional Ownership Tell Us About Zoom Video Communications?
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.
Zoom Video Communications already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Zoom Video Communications' historic earnings and revenue below, but keep in mind there's always more to the story.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Zoom Video Communications is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is the CEO Eric Yuan with 11% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.9% and 4.6% of the stock.
Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 14 shareholders, meaning that no single shareholder has a majority interest in the ownership.
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 Zoom Video Communications
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
It seems insiders own a significant proportion of Zoom Video Communications, Inc.. Insiders own US$4.8b worth of shares in the US$19b company. That's quite meaningful. 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 19% stake in Zoom Video Communications. 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:
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Zoom Video Communications you should know about.
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.
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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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