Despite selling recently, Travelzoo (NASDAQ:TZOO) insiders own 38% stake and recent decline might have cost them

Key Insights

• Travelzoo's significant insider ownership suggests inherent interests in company's expansion
• 53% of the business is held by the top 4 shareholders
• Recent sales by insiders

To get a sense of who is truly in control of Travelzoo (NASDAQ:TZOO), it is important to understand the ownership structure of the business. We can see that individual insiders own the lion's share in the company with 38% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Even though insiders have sold shares recently, the group owns the most numbers of shares in the company. As a result, the group bore the brunt of last week’s US$50m market cap loss.

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

View our latest analysis for Travelzoo

What Does The Institutional Ownership Tell Us About Travelzoo?

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.

Travelzoo already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Travelzoo's historic earnings and revenue below, but keep in mind there's always more to the story.

It would appear that 6.0% of Travelzoo shares are controlled by hedge funds. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In Travelzoo's case, its Top Key Executive, Ralph Bartel, is the largest shareholder, holding 38% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 6.0% and 5.4%, of the shares outstanding, respectively.

On looking further, we found that 53% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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 Travelzoo

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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.

Our information suggests that insiders maintain a significant holding in Travelzoo. It has a market capitalization of just US$201m, and insiders have US$76m worth of shares in their own names. 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

With a 22% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Travelzoo. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Travelzoo better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Travelzoo you should know about.

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.