Yahoo Finance Institutional investors have a lot riding on Duolingo, Inc. (NASDAQ:DUOL) with 63% ownership
Key Insights
Given the large stake in the stock by institutions, Duolingo's stock price might be vulnerable to their trading decisions
A total of 7 investors have a majority stake in the company with 51% ownership
Every investor in Duolingo, Inc. (NASDAQ:DUOL) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 63% to be precise, is institutions. 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 7.4% last week. One-year return to shareholders is currently 99% and last week’s gain was the icing on the cake.
Let's delve deeper into each type of owner of Duolingo, beginning with the chart below.
See our latest analysis for Duolingo
What Does The Institutional Ownership Tell Us About Duolingo?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
Duolingo 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. 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 Duolingo, (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 would appear that 10% of Duolingo shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Looking at our data, we can see that the largest shareholder is Baillie Gifford & Co. with 11% of shares outstanding. Durable Capital Partners, LP is the second largest shareholder owning 10% of common stock, and Severin Hacker holds about 7.8% of the company stock. Severin Hacker, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors. Additionally, the company's CEO Luis von Ahn Arellano directly holds 7.6% of the total shares outstanding.
We also observed that the top 7 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.
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 Duolingo
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 a reasonable proportion of Duolingo, Inc.. Insiders own US$1.0b worth of shares in the US$6.2b company. That's quite meaningful. 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
With a 11% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Duolingo. 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. Take risks for example - Duolingo has 2 warning signs we think you should be aware of.
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.
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