Eventbrite, Inc.'s (NYSE:EB) latest 14% decline adds to one-year losses, institutional investors may consider drastic measures

Key Insights

• Given the large stake in the stock by institutions, Eventbrite's stock price might be vulnerable to their trading decisions
• A total of 11 investors have a majority stake in the company with 52% ownership
• Insiders have sold recently

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To get a sense of who is truly in control of Eventbrite, Inc. (NYSE:EB), 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 63% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$225m last week after a 14% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 58% might not go down well especially with this category of shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in Eventbrite's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

In the chart below, we zoom in on the different ownership groups of Eventbrite.

See our latest analysis for Eventbrite

What Does The Institutional Ownership Tell Us About Eventbrite?

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 Eventbrite. 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 Eventbrite, (below). Of course, keep in mind that there are other factors to consider, too.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. It looks like hedge funds own 6.7% of Eventbrite shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. The Hartz Family Revocable Trust is currently the largest shareholder, with 7.2% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.0% and 6.7%, of the shares outstanding, respectively. Furthermore, CEO Julia Hartz is the owner of 1.7% of the company's shares.

After doing some more digging, we found that the top 11 have the combined ownership of 52% in the company, suggesting that no single shareholder has significant control over 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 Eventbrite

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 most recent data indicates that insiders own some shares in Eventbrite, Inc.. It has a market capitalization of just US$225m, and insiders have US$13m worth of shares, in their own names. This shows at least some alignment. You can click here to see if those 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 Eventbrite. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With an ownership of 5.1%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

We can see that Private Companies own 7.2%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Eventbrite better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Eventbrite , and understanding them should be part of your investment process.

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.