Institutional investors may adopt severe steps after Datadog, Inc.'s (NASDAQ:DDOG) latest 4.7% drop adds to a year losses

To get a sense of who is truly in control of Datadog, Inc. (NASDAQ:DDOG), 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 74% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors saw their holdings value drop by 4.7% last week. The recent loss, which adds to a one-year loss of 59% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell Datadog which might hurt individual investors.

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

Check out our latest analysis for Datadog

What Does The Institutional Ownership Tell Us About Datadog?

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.

We can see that Datadog 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 Datadog, (below). Of course, keep in mind that there are other factors to consider, too.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Datadog is not owned by hedge funds. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 7.6% of shares outstanding. With 5.6% and 4.9% of the shares outstanding respectively, RTP Ventures and Morgan Stanley Investment Management Inc. are the second and third largest shareholders. Furthermore, CEO Olivier Pomel is the owner of 2.6% of the company's shares.

After doing some more digging, we found that the top 18 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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 Datadog

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.

Shareholders would probably be interested to learn that insiders own shares in Datadog, Inc.. The insiders have a meaningful stake worth US$1.7b. Most would say this shows a good alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

With a 13% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Datadog. 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 5.6%, private equity firms could influence the Datadog board. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Datadog better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Datadog you should be aware of.

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.