More details: Visit websiteGiven the large stake in the stock by institutions, Shopify's stock price might be vulnerable to their trading decisions
To get a sense of who is truly in control of Shopify Inc. ( NYSE:SHOP ), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 66% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
And last week, institutional investors ended up benefitting the most after the company hit US$139b in market cap. One-year return to shareholders is currently 29% and last week's gain was the icing on the cake.
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.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in Shopify. Looking at our data, we can see that the largest shareholder is Capital Research and Management Company with 9.6% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 6.2% and 4.9%, of the shares outstanding, respectively. Tobias Lütke, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.
Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.
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.
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