With 57% institutional ownership, Freshworks Inc. (NASDAQ:FRSH) is a favorite amongst the big guns

Key Insights

• Given the large stake in the stock by institutions, Freshworks' stock price might be vulnerable to their trading decisions
• The top 8 shareholders own 52% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

Every investor in Freshworks Inc. (NASDAQ:FRSH) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 57% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.

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

Check out our latest analysis for Freshworks

What Does The Institutional Ownership Tell Us About Freshworks?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

As you can see, institutional investors have a fair amount of stake in Freshworks. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Freshworks' earnings history below. Of course, the future is what really matters.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Freshworks is not owned by hedge funds. Our data shows that Accel Partners is the largest shareholder with 11% of shares outstanding. CapitalG Management Company, LLC is the second largest shareholder owning 8.1% of common stock, and The Vanguard Group, Inc. holds about 7.6% of the company stock.

We did some more digging and found that 8 of the top shareholders account for roughly 52% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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

Insider Ownership Of Freshworks

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Shareholders would probably be interested to learn that insiders own shares in Freshworks Inc.. The insiders have a meaningful stake worth US$196m. Most would see this as a real positive. 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

With a 12% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Freshworks. 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 an ownership of 26%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Freshworks , and understanding them should be part of your investment process.

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.