AudioEye, Inc.'s (NASDAQ:AEYE) institutional investors lost 11% last week but have benefitted from longer-term gains

Key Insights

• Significantly high institutional ownership implies AudioEye's stock price is sensitive to their trading actions
• The top 12 shareholders own 51% of the company
• Insiders have sold recently

To get a sense of who is truly in control of AudioEye, Inc. (NASDAQ:AEYE), 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 39% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 11% in value last week. Still, the 170% one-year gains may have helped mitigate their overall losses. They should, however, be mindful of further losses in the future.

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

View our latest analysis for AudioEye

What Does The Institutional Ownership Tell Us About AudioEye?

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.

We can see that AudioEye does have institutional investors; and they hold a good portion of the company's stock. 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 AudioEye, (below). Of course, keep in mind that there are other factors to consider, too.

AudioEye is not owned by hedge funds. Sero Capital is currently the largest shareholder, with 15% of shares outstanding. The second and third largest shareholders are David Moradi and Carr Bettis, with an equal amount of shares to their name at 5.6%. Interestingly, the bottom two of the top three shareholders also hold the title of Chief Executive Officer and Chairman of the Board, respectively, suggesting that these insiders have a personal stake in the company.

A closer look at our ownership figures suggests that the top 12 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of AudioEye

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.

Our information suggests that insiders maintain a significant holding in AudioEye, Inc.. Insiders have a US$32m stake in this US$200m business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

With a 29% ownership, the general public, mostly comprising of individual investors, have some degree of sway over AudioEye. 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 15%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it 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 AudioEye , and understanding them should be part of your investment process.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.