Institutions profited after Rackspace Technology, Inc.'s (NASDAQ:RXT) market cap rose US$77m last week but private equity firms profited the most

Key Insights

• The considerable ownership by private equity firms in Rackspace Technology indicates that they collectively have a greater say in management and business strategy
• The largest shareholder of the company is Apollo Global Management, Inc. with a 57% stake
• Insiders have bought recently

Every investor in Rackspace Technology, Inc. (NASDAQ:RXT) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are private equity firms with 57% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Private equity firms gained the most after market cap touched US$537m last week, while institutions who own 22% also benefitted.

Let's take a closer look to see what the different types of shareholders can tell us about Rackspace Technology.

View our latest analysis for Rackspace Technology

What Does The Institutional Ownership Tell Us About Rackspace Technology?

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 Rackspace Technology 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 Rackspace Technology's historic earnings and revenue below, but keep in mind there's always more to the story.

Rackspace Technology is not owned by hedge funds. The company's largest shareholder is Apollo Global Management, Inc., with ownership of 57%. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. Meanwhile, the second and third largest shareholders, hold 5.9% and 4.3%, of the shares outstanding, respectively. Additionally, the company's CEO Amar Maletira directly holds 2.2% of the total shares outstanding.

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

Insider Ownership Of Rackspace Technology

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

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 Rackspace Technology, Inc.. In their own names, insiders own US$53m worth of stock in the US$537m 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 11% stake in Rackspace Technology. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Equity Ownership

With an ownership of 57%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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 Rackspace Technology better, we need to consider many other factors. For example, we've discovered 3 warning signs for Rackspace Technology (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

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.