Ambarella, Inc.'s (NASDAQ:AMBA) latest 4.2% decline adds to one-year losses, institutional investors may consider drastic measures

Key Insights

• Given the large stake in the stock by institutions, Ambarella's stock price might be vulnerable to their trading decisions
• 50% of the business is held by the top 13 shareholders
• Insiders have sold recently

To get a sense of who is truly in control of Ambarella, Inc. (NASDAQ:AMBA), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 83% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutional investors saw their holdings value drop by 4.2% last week. The recent loss, which adds to a one-year loss of 31% for stockholders, may not sit well with this group of investors. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the decline continues, institutional investors may be pressured to sell Ambarella which might hurt individual investors.

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

See our latest analysis for Ambarella

What Does The Institutional Ownership Tell Us About Ambarella?

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.

As you can see, institutional investors have a fair amount of stake in Ambarella. 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 Ambarella, (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. Ambarella is not owned by hedge funds. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 10.0%. In comparison, the second and third largest shareholders hold about 8.2% and 4.4% of the stock. In addition, we found that Feng-Ming Wang, the CEO has 2.0% of the shares allocated to their name.

After doing some more digging, we found that the top 13 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Ambarella

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

Shareholders would probably be interested to learn that insiders own shares in Ambarella, Inc.. The insiders have a meaningful stake worth US$118m. Most would see this as a real positive. It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 11% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Ambarella. 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:

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 Ambarella 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.