retail investors who own 30% along with institutions invested in AudioEye, Inc. (NASDAQ:AEYE) saw increase in their holdings value last week

Key Insights

• AudioEye's significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 6 investors have a majority stake in the company with 51% ownership
• Insiders own 21% of AudioEye

A look at the shareholders of AudioEye, Inc. (NASDAQ:AEYE) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are retail investors with 30% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While retail investors were the group that benefitted the most from last week’s US$27m market cap gain, institutions too had a 25% share in those profits.

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

Check out our latest analysis for AudioEye

What Does The Institutional Ownership Tell Us About AudioEye?

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.

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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see AudioEye's historic earnings and revenue below, but keep in mind there's always more to the story.

AudioEye is not owned by hedge funds. The company's largest shareholder is Sero Capital, with ownership of 24%. Meanwhile, the second and third largest shareholders, hold 7.5% and 7.3%, of the shares outstanding, respectively. Carr Bettis, who is the second-largest shareholder, also happens to hold the title of Top Key Executive. Additionally, the company's CEO David Moradi directly holds 4.7% of the total shares outstanding.

We did some more digging and found that 6 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of AudioEye

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own a reasonable proportion of AudioEye, Inc.. Insiders own US$62m worth of shares in the US$297m company. 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 30% ownership, the general public, mostly comprising of individual investors, have some degree of sway over AudioEye. 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 Equity Ownership

With a stake of 24%, private equity firms could influence the AudioEye board. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand AudioEye better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with AudioEye (at least 1 which makes us a bit uncomfortable) , 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.