Institutional owners may ignore Cerence Inc.'s (NASDAQ:CRNC) recent US$58m market cap decline as longer-term profits stay in the green

Key Insights

• Given the large stake in the stock by institutions, Cerence's stock price might be vulnerable to their trading decisions
• The top 12 shareholders own 51% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

We've discovered 2 warning signs about Cerence. View them for free.

Every investor in Cerence Inc. (NASDAQ:CRNC) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 79% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Institutional investors endured the highest losses after the company's market cap fell by US$58m last week. However, the 99% one-year return to shareholders may have helped lessen their pain. They should, however, be mindful of further losses in the future.

Let's delve deeper into each type of owner of Cerence, beginning with the chart below.

Check out our latest analysis for Cerence

What Does The Institutional Ownership Tell Us About Cerence?

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.

Cerence already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Cerence, (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. Cerence is not owned by hedge funds. The Vanguard Group, Inc. is currently the largest shareholder, with 8.0% of shares outstanding. For context, the second largest shareholder holds about 7.6% of the shares outstanding, followed by an ownership of 6.9% by the third-largest shareholder.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 12 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Cerence

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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.

We can see that insiders own shares in Cerence Inc.. In their own names, insiders own US$6.4m worth of stock in the US$385m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 19% stake in Cerence. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 2 warning signs for Cerence you should be aware of.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

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.