Key Insights

• Significantly high institutional ownership implies Stem's stock price is sensitive to their trading actions
• A total of 24 investors have a majority stake in the company with 50% ownership
• Recent sales by insiders

If you want to know who really controls Stem, Inc. (NYSE:STEM), 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 67% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutional investors saw their holdings value drop by 26% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 69% might not go down well especially with this category of 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 decline continues, institutional investors may be pressured to sell Stem which might hurt individual investors.

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

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.

We can see that Stem does have institutional investors; and they hold a good portion of the company's stock. 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 Stem's historic earnings and revenue below, but keep in mind there's always more to the story.

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 Stem. The company's largest shareholder is BlackRock, Inc., with ownership of 6.9%. The Vanguard Group, Inc. is the second largest shareholder owning 6.9% of common stock, and Schroder Investment Management Limited holds about 6.6% of the company stock.

After doing some more digging, we found that the top 24 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

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. 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. 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.

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 report that insiders do own shares in Stem, Inc.. It has a market capitalization of just US$309m, and insiders have US$13m worth of shares, in their own names. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 29% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Stem. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 5 warning signs for Stem that you should be aware of.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.