Is ServiceNow, Inc. (NYSE:NOW) Popular Amongst Institutions?

By
Simply Wall St
Published
August 25, 2021
NYSE:NOW
Source: Shutterstock

A look at the shareholders of ServiceNow, Inc. (NYSE:NOW) can tell us which group is most powerful. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. We also tend to see lower insider ownership in companies that were previously publicly owned.

ServiceNow is a pretty big company. It has a market capitalization of US$123b. Normally institutions would own a significant portion of a company this size. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. Let's delve deeper into each type of owner, to discover more about ServiceNow.

Check out our latest analysis for ServiceNow

ownership-breakdown
NYSE:NOW Ownership Breakdown August 25th 2021

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 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. 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.

earnings-and-revenue-growth
NYSE:NOW Earnings and Revenue Growth August 25th 2021

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 7.9%. In comparison, the second and third largest shareholders hold about 7.8% and 7.3% of the stock.

A closer look at our ownership figures suggests that the top 18 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. 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 ServiceNow

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. 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.

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 most recent data indicates that insiders own less than 1% of ServiceNow, Inc.. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$380m of stock. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, with a 11% 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:

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. For example, we've discovered 5 warning signs for ServiceNow 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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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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020


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