Institutional investors in ServiceNow, Inc. (NYSE:NOW) lost 4.9% last week but have reaped the benefits of longer-term growth

Key Insights

• Significantly high institutional ownership implies ServiceNow's stock price is sensitive to their trading actions
• 51% of the business is held by the top 24 shareholders
• Recent sales by insiders

If you want to know who really controls ServiceNow, Inc. (NYSE:NOW), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 89% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Institutional investors endured the highest losses after the company's market cap fell by US$9.9b last week. Still, the 20% one-year gains may have helped mitigate their overall losses. But they would probably be wary of future losses.

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

See our latest analysis for ServiceNow

What Does The Institutional Ownership Tell Us About ServiceNow?

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

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. ServiceNow is not owned by hedge funds. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 9.3%. For context, the second largest shareholder holds about 8.9% of the shares outstanding, followed by an ownership of 4.4% by the third-largest shareholder.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 24 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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

Insider Ownership Of ServiceNow

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 information suggests that ServiceNow, Inc. insiders own under 1% of the company. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$324m of stock. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 10% ownership, the general public, mostly comprising of individual investors, have some degree of sway over ServiceNow. 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 ServiceNow better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for ServiceNow you should know about.

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.