Zip Co Limited's (ASX:ZIP) market cap touched AU$952m last week, benefiting both individual investors who own 56% as well as institutions

Key Insights

• Zip Co's significant individual investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• 33% of the business is held by the top 25 shareholders
• Institutional ownership in Zip Co is 14%

A look at the shareholders of Zip Co Limited (ASX:ZIP) can tell us which group is most powerful. With 56% stake, individual investors 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.

Following a 10% increase in the stock price last week, individual investors profited the most, but institutions who own 14% stock also stood to gain from the increase.

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

View our latest analysis for Zip Co

What Does The Institutional Ownership Tell Us About Zip Co?

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.

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

We note that hedge funds don't have a meaningful investment in Zip Co. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In Zip Co's case, its Top Key Executive, Larry Diamond, is the largest shareholder, holding 6.7% of shares outstanding. With 4.8% and 4.2% of the shares outstanding respectively, State Street Global Advisors, Inc. and The Vanguard Group, Inc. are the second and third largest shareholders.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where 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 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 Zip Co

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own some shares in Zip Co Limited. It has a market capitalization of just AU$952m, and insiders have AU$92m worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a substantial 56% stake in Zip Co, suggesting it is a fairly popular stock. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Zip Co is showing 2 warning signs in our investment analysis , 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.