A look at the shareholders of RingCentral, Inc. (NYSE:RNG) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 74% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
As a result, institutional investors endured the highest losses last week after market cap fell by US$295m. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 81% for shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the downtrend continues, institutions may face pressures to sell RingCentral, which might have negative implications on individual investors.
In the chart below, we zoom in on the different ownership groups of RingCentral.
What Does The Institutional Ownership Tell Us About RingCentral?
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.
As you can see, institutional investors have a fair amount of stake in RingCentral. 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 RingCentral's 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. RingCentral is not owned by hedge funds. The Vanguard Group, Inc. is currently the company's largest shareholder with 8.9% of shares outstanding. In comparison, the second and third largest shareholders hold about 6.3% and 6.2% of the stock. Vladimir Shmunis, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.
A closer look at our ownership figures suggests that the top 16 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.
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 are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of RingCentral
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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.
Our most recent data indicates that insiders own a reasonable proportion of RingCentral, Inc.. It is very interesting to see that insiders have a meaningful US$417m stake in this US$4.0b business. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.
General Public Ownership
With a 16% ownership, the general public, mostly comprising of individual investors, have some degree of sway over RingCentral. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
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 for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with RingCentral , and understanding them should be part of your investment process.
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.
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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.