Great week for Freshworks Inc. (NASDAQ:FRSH) institutional investors after losing 21% over the previous year

Key Insights

• Given the large stake in the stock by institutions, Freshworks' stock price might be vulnerable to their trading decisions
• The top 9 shareholders own 52% of the company
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

Every investor in Freshworks Inc. (NASDAQ:FRSH) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 56% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Last week's US$260m market cap gain would probably be appreciated by institutional investors, especially after a year of 21% losses.

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

See our latest analysis for Freshworks

What Does The Institutional Ownership Tell Us About Freshworks?

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 Freshworks does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Freshworks' historic earnings and revenue below, but keep in mind there's always more to the story.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Freshworks. The company's largest shareholder is CapitalG Management Company, LLC, with ownership of 8.1%. Meanwhile, the second and third largest shareholders, hold 7.8% and 7.7%, of the shares outstanding, respectively.

On further inspection, we found that more than half the company's shares are owned by the top 9 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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

Insider Ownership Of Freshworks

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 most recent data indicates that insiders own some shares in Freshworks Inc.. This is a big company, so it is good to see this level of alignment. Insiders own US$285m worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 16% stake in Freshworks. 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

Private equity firms hold a 23% stake in Freshworks. This suggests they can be influential in key policy decisions. 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 Freshworks better, we need to consider many other factors. Take risks for example - Freshworks has 1 warning sign we think you should be aware of.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.