Institutional investors in Zscaler, Inc. (NASDAQ:ZS) see US$1.1b decrease in market cap last week, although long-term gains have benefitted them.

Key Insights

• Significantly high institutional ownership implies Zscaler's stock price is sensitive to their trading actions
• The top 6 shareholders own 50% of the company
• Insiders have sold recently

Every investor in Zscaler, Inc. (NASDAQ:ZS) should be aware of the most powerful shareholder groups. With 48% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors was the group most impacted after the company's market cap fell to US$28b last week. However, the 84% one-year return to shareholders may have helped lessen their pain. But they would probably be wary of future losses.

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

Check out our latest analysis for Zscaler

What Does The Institutional Ownership Tell Us About Zscaler?

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

We note that hedge funds don't have a meaningful investment in Zscaler. The company's largest shareholder is Ajay Mangal, with ownership of 20%. Jagtar Chaudhry is the second largest shareholder owning 18% of common stock, and The Vanguard Group, Inc. holds about 5.9% of the company stock. Jagtar Chaudhry, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

On further inspection, we found that more than half the company's shares are owned by the top 6 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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Zscaler

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 information suggests that insiders maintain a significant holding in Zscaler, Inc.. It is very interesting to see that insiders have a meaningful US$11b stake in this US$28b business. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 13% stake in Zscaler. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Zscaler better, we need to consider many other factors. For instance, we've identified 2 warning signs for Zscaler that you should be aware of.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

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.