Institutional owners may consider drastic measures as Tucows Inc.'s (NASDAQ:TCX) recent US$24m drop adds to long-term losses

Key Insights

• Given the large stake in the stock by institutions, Tucows' stock price might be vulnerable to their trading decisions
• 52% of the business is held by the top 4 shareholders
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

A look at the shareholders of Tucows Inc. (NASDAQ:TCX) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 71% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors endured the highest losses after the company's share price fell by 11% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 8.2% might not go down well especially with this category of shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the downtrend continues, institutions may face pressures to sell Tucows, which might have negative implications on individual investors.

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

Check out our latest analysis for Tucows

What Does The Institutional Ownership Tell Us About Tucows?

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.

Tucows already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Tucows' 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. It looks like hedge funds own 8.3% of Tucows shares. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Our data shows that EdgePoint Investment Group Inc. is the largest shareholder with 19% of shares outstanding. For context, the second largest shareholder holds about 18% of the shares outstanding, followed by an ownership of 8.3% by the third-largest shareholder. In addition, we found that Elliot Noss, the CEO has 5.9% of the shares allocated to their name.

Our research also brought to light the fact that roughly 52% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Tucows

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

We can see that insiders own shares in Tucows Inc.. It has a market capitalization of just US$197m, and insiders have US$16m worth of shares, in their own names. It is good to see some investment by insiders, but we usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.

General Public Ownership

With a 13% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Tucows. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Tucows better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for Tucows you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.