Agora, Inc.'s (NASDAQ:API) large institutional owners must be happy as stock continues to impress, up 33% over the past week

Key Insights

• Given the large stake in the stock by institutions, Agora's stock price might be vulnerable to their trading decisions
• A total of 4 investors have a majority stake in the company with 54% ownership
• 24% of Agora is held by insiders

To get a sense of who is truly in control of Agora, Inc. (NASDAQ:API), 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 30% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And things are looking up for institutional investors after the company gained US$138m in market cap last week. One-year return to shareholders is currently 107% and last week’s gain was the icing on the cake.

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

View our latest analysis for Agora

What Does The Institutional Ownership Tell Us About Agora?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors have a fair amount of stake in Agora. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Agora, (below). Of course, keep in mind that there are other factors to consider, too.

It looks like hedge funds own 5.2% of Agora shares. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. With a 24% stake, CEO Bin Zhao is the largest shareholder. In comparison, the second and third largest shareholders hold about 16% and 8.9% of the stock.

Our research also brought to light the fact that roughly 54% of the company is controlled by the top 4 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 Agora

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 Agora, Inc.. Insiders have a US$130m stake in this US$532m business. 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

With a 25% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Agora. 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

Private equity firms hold a 16% stake in Agora. This suggests they can be influential in key policy decisions. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Agora better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with Agora (including 1 which is a bit concerning) .

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.