Is Zscaler, Inc.'s (NASDAQ:ZS) Shareholder Ownership Skewed Towards Insiders?

By
Simply Wall St
Published
October 25, 2021
NasdaqGS:ZS
Source: Shutterstock

Every investor in Zscaler, Inc. (NASDAQ:ZS) should be aware of the most powerful shareholder groups. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.

With a market capitalization of US$43b, Zscaler is rather large. We'd expect to see institutional investors on the register. Companies of this size are usually well known to retail investors, too. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. Let's take a closer look to see what the different types of shareholders can tell us about Zscaler.

View our latest analysis for Zscaler

ownership-breakdown
NasdaqGS:ZS Ownership Breakdown October 26th 2021

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.

As you can see, institutional investors have a fair amount of stake in Zscaler. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Zscaler, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NasdaqGS:ZS Earnings and Revenue Growth October 26th 2021

We note that hedge funds don't have a meaningful investment in Zscaler. With a 19% stake, CEO Jagtar Chaudhry is the largest shareholder. Ajay Mangal is the second largest shareholder owning 19% of common stock, and BlackRock, Inc. holds about 5.4% of the company stock.

Our research also brought to light the fact that roughly 51% of the company is controlled by the top 5 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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Zscaler

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our most recent data indicates that insiders own a reasonable proportion of Zscaler, Inc.. Insiders own US$17b worth of shares in the US$43b company. That's quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, with a 16% stake in the company, will not easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 4 warning signs for Zscaler that you should be aware of before investing here.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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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