Following a 15% decline over last year, recent gains may please PayPal Holdings, Inc. (NASDAQ:PYPL) institutional owners

Key Insights

• Given the large stake in the stock by institutions, PayPal Holdings' stock price might be vulnerable to their trading decisions
• The top 25 shareholders own 40% of the company
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

If you want to know who really controls PayPal Holdings, Inc. (NASDAQ:PYPL), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 71% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors would probably welcome last week's 7.7% increase in the share price after a year of 15% 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 PayPal Holdings.

View our latest analysis for PayPal Holdings

What Does The Institutional Ownership Tell Us About PayPal Holdings?

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 PayPal Holdings. 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. 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 PayPal Holdings' historic earnings and revenue below, but keep in mind there's always more to the story.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in PayPal Holdings. The Vanguard Group, Inc. is currently the company's largest shareholder with 8.4% of shares outstanding. In comparison, the second and third largest shareholders hold about 6.8% and 4.2% of the stock.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of PayPal Holdings

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 less than 1% of PayPal Holdings, Inc.. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$96m of stock. In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.

General Public Ownership

With a 29% ownership, the general public, mostly comprising of individual investors, have some degree of sway over PayPal Holdings. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand PayPal Holdings better, we need to consider many other factors.

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.

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.