The recent drop in prices must have disappointed Tempus AI, Inc. (NASDAQ:TEM) institutional investors who own 36% of the shares

Key Insights

• Given the large stake in the stock by institutions, Tempus AI's stock price might be vulnerable to their trading decisions
• A total of 5 investors have a majority stake in the company with 53% ownership
• Insiders have been selling lately

We've discovered 3 warning signs about Tempus AI. View them for free.

Every investor in Tempus AI, Inc. (NASDAQ:TEM) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 36% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And following last week's 6.2% decline in share price, institutional suffered the most losses.

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

Check out our latest analysis for Tempus AI

What Does The Institutional Ownership Tell Us About Tempus AI?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

As you can see, institutional investors have a fair amount of stake in Tempus AI. 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 Tempus AI, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Tempus AI. With a 26% stake, CEO Eric Lefkofsky is the largest shareholder. BK TL21 LLC is the second largest shareholder owning 8.8% of common stock, and Baillie Gifford & Co. holds about 7.9% of the company stock.

Our research also brought to light the fact that roughly 53% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

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 Tempus AI

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.

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 information suggests that insiders maintain a significant holding in Tempus AI, Inc.. Insiders own US$2.3b worth of shares in the US$7.0b company. That's quite meaningful. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

The general public, who are usually individual investors, hold a 21% stake in Tempus AI. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Company Ownership

Our data indicates that Private Companies hold 8.8%, of the company's shares. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

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 risks, for instance. Every company has them, and we've spotted 3 warning signs for Tempus AI you should know about.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.