Should You Be Concerned About Axon Enterprise Inc's (NASDAQ:AAXN) Shareholders?

I am going to take a deep dive into Axon Enterprise Inc’s (NASDAQ:AAXN) most recent ownership structure, not a frequent subject of discussion among individual investors. A company's ownership structure is often linked to its share performance in both the long- and short-term. Different types of investors can have varying degrees of influence on a company’s management team. For example, an active institutional investor may be more likely to hold a company accountable for certain actions whereas a passive fund will move in and out of stocks without regards to corporate governance. The implications of these institutions’ actions can either benefit or hinder individual investors, so it is important to understand the ownership composition of your stock investment. Therefore, I will take a look at AAXN's shareholders in more detail.

See our latest analysis for Axon Enterprise

Institutional Ownership

AAXN's 76.37% institutional ownership seems enough to cause large share price movements in the case of significant share sell-off or acquisitions by institutions, particularly when there is a low level of public shares available on the market to trade. These moves, at least in the short-term, are generally observed in an institutional ownership mix comprising of active stock pickers, in particular levered hedge funds, which can cause large price swings. Hedge funds, considered active investors, hold a 7.37% stake in the company, which may be the cause of high short-term volatility in the stock price. I am going to further examine AAXN's ownership structure to check how other major shareholders can affect its investment case.

Insider Ownership

Insiders form a group of important ownership types as they manage the company's operations and decide the best use of capital. Insider ownership has been linked to better alignment between management and shareholders. A stake of 2.10% in the large-cap AAXN is relatively significant. This means there is some alignment of interest with shareholders. A higher level of insider ownership has been found to reflect the choosing of projects with higher return on investments compared to lower returning projects for the sake of expansion. In addition to this, it may be interesting to look at insider buying and selling activities. Keep in mind that buying may be sign of upbeat future expectations, but selling doesn't necessarily mean the opposite as the insiders might just be doing it out of their personal financial needs.

General Public Ownership

A substantial ownership of 14.17% in AAXN is held by the general public. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses.

Next Steps:

With significant institutional ownership, including active hedge, existing investors should seek a margin of safety when investing in AAXN. This is to avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. However, if you are building an investment case for AAXN, ownership structure alone should not dictate your decision to buy or sell the stock. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of Axon Enterprise’s share price. I urge you to complete your research by taking a look at the following:

1. Future Outlook: What are well-informed industry analysts predicting for AAXN’s future growth? Take a look at our free research report of analyst consensus for AAXN’s outlook.
2. Past Track Record: Has AAXN been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of AAXN's historicals for more clarity.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article 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.