Yahoo Finance In the wake of Okta, Inc.'s (NASDAQ:OKTA) latest US$424m market cap drop, institutional owners may be forced to take severe actions
Key Insights
Given the large stake in the stock by institutions, Okta's stock price might be vulnerable to their trading decisions
50% of the business is held by the top 25 shareholders
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
To get a sense of who is truly in control of Okta, Inc. (NASDAQ:OKTA), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 78% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
As a result, institutional investors endured the highest losses last week after market cap fell by US$424m. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 49% might not go down well especially with this category of shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the downtrend continues, institutions may face pressures to sell Okta, which might have negative implications on individual investors.
Let's take a closer look to see what the different types of shareholders can tell us about Okta.
View our latest analysis for Okta
What Does The Institutional Ownership Tell Us About Okta?
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.
We can see that Okta does have institutional investors; and they hold a good portion of the company's stock. 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 Okta'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. Hedge funds don't have many shares in Okta. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 8.7%. Meanwhile, the second and third largest shareholders, hold 6.0% and 4.5%, of the shares outstanding, respectively. Furthermore, CEO Todd McKinnon is the owner of 3.5% of the company's shares.
Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 25 shareholders, meaning that no single shareholder has a majority interest in the ownership.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Okta
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.
Shareholders would probably be interested to learn that insiders own shares in Okta, Inc.. It is a very large company, and board members collectively own US$645m worth of shares (at current prices). we sometimes take an interest in whether they have been buying or selling.
General Public Ownership
With a 16% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Okta. 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:
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. Take risks for example - Okta 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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