Institutional owners may consider drastic measures as InMode Ltd.'s (NASDAQ:INMD) recent US$51m drop adds to long-term losses

Key Insights

• Significantly high institutional ownership implies InMode's stock price is sensitive to their trading actions
• A total of 14 investors have a majority stake in the company with 50% ownership
• Insiders own 15% of InMode

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Every investor in InMode Ltd. (NASDAQ:INMD) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 72% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, institutional investors endured the highest losses last week after market cap fell by US$51m. The recent loss, which adds to a one-year loss of 27% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the downtrend continues, institutions may face pressures to sell InMode, which might have negative implications on individual investors.

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

Check out our latest analysis for InMode

What Does The Institutional Ownership Tell Us About InMode?

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.

As you can see, institutional investors have a fair amount of stake in InMode. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 InMode's historic earnings and revenue below, but keep in mind there's always more to the story.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. InMode is not owned by hedge funds. The company's largest shareholder is BlackRock, Inc., with ownership of 8.9%. For context, the second largest shareholder holds about 5.5% of the shares outstanding, followed by an ownership of 4.9% by the third-largest shareholder. Note that the second and third-largest shareholders are also Chief Executive Officer and Member of the Board of Directors, respectively, meaning that the company's top shareholders are insiders.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 14 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of InMode

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. 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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our information suggests that insiders maintain a significant holding in InMode Ltd.. Insiders own US$136m worth of shares in the US$888m company. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 13% stake in the company, and hence can't easily be ignored. 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 InMode better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with InMode .

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.