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Institutional Owners May Take Dramatic Actions as Stem, Inc.'s (NYSE:STEM) Recent 14% Drop Adds to One-year Losses

Simply Wall St ·  10/26/2023 19:05

Key Insights

  • Institutions' substantial holdings in Stem implies that they have significant influence over the company's share price
  • 51% of the business is held by the top 23 shareholders
  • Recent purchases by insiders

To get a sense of who is truly in control of Stem, Inc. (NYSE:STEM), it is important to understand the ownership structure of the business. With 72% 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 saw their holdings value drop by 14% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 77% for shareholders. Often called "market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the downtrend continues, institutions may face pressures to sell Stem, which might have negative implications on individual investors.

Let's take a closer look to see what the different types of shareholders can tell us about Stem.

See our latest analysis for Stem

ownership-breakdown
NYSE:STEM Ownership Breakdown October 26th 2023

What Does The Institutional Ownership Tell Us About Stem?

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 Stem. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Stem, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NYSE:STEM Earnings and Revenue Growth October 26th 2023

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 Stem. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 8.8%. The second and third largest shareholders are BlackRock, Inc. and Schroder Investment Management Limited, with an equal amount of shares to their name at 6.8%.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 23 shareholders, meaning that no single shareholder has a majority interest in the ownership.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Stem

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

We can see that insiders own shares in Stem, Inc.. As individuals, the insiders collectively own US$18m worth of the US$494m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 25% 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:

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 3 warning signs with Stem , and understanding them should be part of your investment process.

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.

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.

Disclaimer: This content is for informational and educational purposes only and does not constitute a recommendation or endorsement of any specific investment or investment strategy. Read more
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