Private equity firms who have a significant stake must be disappointed along with institutions after CS Disco, Inc.'s (NYSE:LAW) market cap dropped by US$28m

Key Insights

• Significant control over CS Disco by private equity firms implies that the general public has more power to influence management and governance-related decisions
• 50% of the business is held by the top 4 shareholders
• Insiders have been selling lately

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If you want to know who really controls CS Disco, Inc. (NYSE:LAW), then you'll have to look at the makeup of its share registry. We can see that private equity firms own the lion's share in the company with 50% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Following a 11% decrease in the stock price last week, private equity firms suffered the most losses, but institutions who own 30% stock also took a hit.

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

Check out our latest analysis for CS Disco

What Does The Institutional Ownership Tell Us About CS Disco?

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 CS Disco does have institutional investors; and they hold a good portion of the company's stock. 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 CS Disco's earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in CS Disco. The company's largest shareholder is Bessemer Venture Partners, with ownership of 14%. For context, the second largest shareholder holds about 13% of the shares outstanding, followed by an ownership of 13% by the third-largest shareholder.

On looking further, we found that 50% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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

Insider Ownership Of CS Disco

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. 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.

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.

We can report that insiders do own shares in CS Disco, Inc.. In their own names, insiders own US$22m worth of stock in the US$253m company. This shows at least some alignment. 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 11% stake in CS Disco. 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 50%, 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Take risks for example - CS Disco has 2 warning signs we think you should be aware of.

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.