Great week for LegalZoom.com, Inc. (NASDAQ:LZ) institutional investors after losing 5.7% over the previous year

Key Insights

• Given the large stake in the stock by institutions, LegalZoom.com's stock price might be vulnerable to their trading decisions
• The top 6 shareholders own 50% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

Our free stock report includes 1 warning sign investors should be aware of before investing in LegalZoom.com. Read for free now.

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. And the group that holds the biggest piece of the pie are institutions with 49% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors would probably welcome last week's 23% increase in the share price after a year of 5.7% 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.

View our latest analysis for LegalZoom.com

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

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that LegalZoom.com 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. 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.

We note that hedge funds don't have a meaningful investment in LegalZoom.com. Francisco Partners Management, L.P. is currently the 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 9.0% by the third-largest shareholder. In addition, we found that Jeffrey Stibel, the CEO has 4.1% of the shares allocated to their name.

We did some more digging and found that 6 of the top shareholders account for roughly 50% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 LegalZoom.com

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

Our most recent data indicates that insiders own some shares in LegalZoom.com, Inc.. This is a big company, so it is good to see this level of alignment. Insiders own US$62m 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

The general public, who are usually individual investors, hold a 16% stake in LegalZoom.com. 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.

Private Equity Ownership

Private equity firms hold a 30% stake in LegalZoom.com. This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with LegalZoom.com , and understanding them should be part of your investment process.

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.