After losing 34% in the past year, LegalZoom.com, Inc. (NASDAQ:LZ) institutional owners must be relieved by the recent gain

Key Insights

• Institutions' substantial holdings in LegalZoom.com implies that they have significant influence over the company's share price
• The top 6 shareholders own 51% of the company
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

To get a sense of who is truly in control of LegalZoom.com, Inc. (NASDAQ:LZ), it is important to understand the ownership structure of the business. With 52% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors would probably welcome last week's 5.5% increase in the share price after a year of 34% losses as a sign that returns may to begin trending higher.

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

See our latest analysis for LegalZoom.com

What Does The Institutional Ownership Tell Us About LegalZoom.com?

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 LegalZoom.com. 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 LegalZoom.com, (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. Hedge funds don't have many shares in LegalZoom.com. Francisco Partners Management, L.P. is currently the company's largest shareholder with 16% of shares outstanding. For context, the second largest shareholder holds about 11% of the shares outstanding, followed by an ownership of 9.3% by the third-largest shareholder. Furthermore, CEO Jeffrey Stibel is the owner of 3.8% of the company's shares.

We did some more digging and found that 6 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 LegalZoom.com

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.

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.

We can report that insiders do own shares in LegalZoom.com, Inc.. The insiders have a meaningful stake worth US$54m. Most would see this as a real positive. If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

With a 12% ownership, the general public, mostly comprising of individual investors, have some degree of sway over LegalZoom.com. 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.

Private Equity Ownership

With a stake of 31%, private equity firms could influence the LegalZoom.com board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.

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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.