Institutional investors may adopt severe steps after Lightspeed Commerce Inc.'s (TSE:LSPD) latest 5.6% drop adds to a year losses

Key Insights

• Significantly high institutional ownership implies Lightspeed Commerce's stock price is sensitive to their trading actions
• 50% of the business is held by the top 11 shareholders
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

Every investor in Lightspeed Commerce Inc. (TSE:LSPD) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 56% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And so it follows that institutional investors was the group most impacted after the company's market cap fell to CA$3.5b last week after a 5.6% drop in the share price. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 3.7% for shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in Lightspeed Commerce's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

Let's delve deeper into each type of owner of Lightspeed Commerce, beginning with the chart below.

View our latest analysis for Lightspeed Commerce

What Does The Institutional Ownership Tell Us About Lightspeed Commerce?

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 Lightspeed Commerce. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Lightspeed Commerce, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Lightspeed Commerce. Caisse de dépôt et placement du Québec is currently the largest shareholder, with 16% of shares outstanding. For context, the second largest shareholder holds about 9.6% of the shares outstanding, followed by an ownership of 9.2% by the third-largest shareholder. Dax Dasilva, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.

A closer look at our ownership figures suggests that the top 11 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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 Lightspeed Commerce

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

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own some shares in Lightspeed Commerce Inc.. This is a big company, so it is good to see this level of alignment. Insiders own CA$333m worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 35% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Lightspeed Commerce. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

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. Take risks for example - Lightspeed Commerce has 1 warning sign we think 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.

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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.