With 42% ownership in Groupon, Inc. (NASDAQ:GRPN), institutional investors have a lot riding on the business

Key Insights

• Institutions' substantial holdings in Groupon implies that they have significant influence over the company's share price
• The top 5 shareholders own 52% of the company
• Insider ownership in Groupon is 13%

A look at the shareholders of Groupon, Inc. (NASDAQ:GRPN) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 42% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And as as result, institutional investors reaped the most rewards after the company's stock price gained 13% last week. The one-year return on investment is currently 119% and last week's gain would have been more than welcomed.

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

View our latest analysis for Groupon

What Does The Institutional Ownership Tell Us About Groupon?

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 Groupon. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Groupon's earnings history below. Of course, the future is what really matters.

It would appear that 5.2% of Groupon 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. Pale Fire Capital SE is currently the largest shareholder, with 26% of shares outstanding. Eric Lefkofsky is the second largest shareholder owning 10% of common stock, and Windward Management LP holds about 6.6% of the company stock. Eric Lefkofsky, who is the second-largest shareholder, also happens to hold the title of Top Key Executive. Additionally, the company's CEO Dusan Senkypl directly holds 1.1% of the total shares outstanding.

On looking further, we found that 52% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. 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 Groupon

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 Groupon, Inc.. It has a market capitalization of just US$624m, and insiders have US$84m worth of shares in their own names. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 13% stake in Groupon. 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.

Private Equity Ownership

With an ownership of 26%, 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.

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 for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Groupon , and understanding them should be part of your investment process.

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.