To get a sense of who is truly in control of AvidXchange Holdings, Inc. (NASDAQ:AVDX), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 42% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).
Clearly, institutional investors benefitted the most after the company's market cap rose by US$67m last week.
Let's delve deeper into each type of owner of AvidXchange Holdings, beginning with the chart below.
What Does The Institutional Ownership Tell Us About AvidXchange Holdings?
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.
AvidXchange Holdings already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 AvidXchange Holdings' historic earnings and revenue below, but keep in mind there's always more to the story.
AvidXchange Holdings is not owned by hedge funds. Our data shows that Bain Capital, LP is the largest shareholder with 9.6% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.5% and 6.8% of the stock. Michael Praeger, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.
On further inspection, we found that more than half the company's shares are owned by the top 10 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
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 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 AvidXchange Holdings
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 AvidXchange Holdings, Inc.. It has a market capitalization of just US$1.8b, and insiders have US$194m worth of shares in their own names. That's quite significant. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.
General Public Ownership
The general public, who are usually individual investors, hold a 26% stake in AvidXchange Holdings. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Equity Ownership
With a stake of 15%, private equity firms could influence the AvidXchange Holdings board. 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.
Private Company Ownership
We can see that Private Companies own 4.9%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.
It's always worth thinking about the different groups who own shares in a company. But to understand AvidXchange Holdings better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for AvidXchange Holdings 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.
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.