In the wake of nLIGHT, Inc.'s (NASDAQ:LASR) latest US$70m market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Significantly high institutional ownership implies nLIGHT's stock price is sensitive to their trading actions
• 51% of the business is held by the top 11 shareholders
• Insiders have sold recently

A look at the shareholders of nLIGHT, Inc. (NASDAQ:LASR) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 80% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutional investors saw their holdings value drop by 13% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 24% might not go down well especially with this category of shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the downtrend continues, institutions may face pressures to sell nLIGHT, which might have negative implications on individual investors.

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

View our latest analysis for nLIGHT

What Does The Institutional Ownership Tell Us About nLIGHT?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

As you can see, institutional investors have a fair amount of stake in nLIGHT. 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 nLIGHT, (below). Of course, keep in mind that there are other factors to consider, too.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. It looks like hedge funds own 5.1% of nLIGHT shares. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. The Vanguard Group, Inc. is currently the company's largest shareholder with 9.3% of shares outstanding. With 8.0% and 5.6% of the shares outstanding respectively, BlackRock, Inc. and Royce & Associates, LP are the second and third largest shareholders. Furthermore, CEO Scott Keeney is the owner of 2.3% of the company's shares.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 11 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. 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 nLIGHT

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.

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.

Shareholders would probably be interested to learn that insiders own shares in nLIGHT, Inc.. It has a market capitalization of just US$537m, and insiders have US$21m worth of shares, in their own names. 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 nLIGHT. 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. Case in point: We've spotted 2 warning signs for nLIGHT you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.