Institutional investors control 83% of Salesforce, Inc. (NYSE:CRM) and were rewarded last week after stock increased 4.6%

Key Insights

• Institutions' substantial holdings in Salesforce implies that they have significant influence over the company's share price

• 50% of the business is held by the top 25 shareholders

• Insiders have sold recently

A look at the shareholders of Salesforce, Inc. (NYSE:CRM) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 83% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And as as result, institutional investors reaped the most rewards after the company's stock price gained 4.6% last week. The one-year return on investment is currently 20% and last week's gain would have been more than welcomed.

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

See our latest analysis for Salesforce

ownership-breakdown

What Does The Institutional Ownership Tell Us About Salesforce?

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.

Salesforce already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Salesforce's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Salesforce is not owned by hedge funds. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 8.7%. BlackRock, Inc. is the second largest shareholder owning 7.5% of common stock, and State Street Global Advisors, Inc. holds about 4.9% of the company stock. Additionally, the company's CEO Marc Benioff directly holds 2.3% of the total shares outstanding.

After doing some more digging, we found that the top 25 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Salesforce

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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 Salesforce, Inc.. The insiders have a meaningful stake worth US$6.3b. 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-- including retail investors -- own 15% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for Salesforce 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com