Key Insights

• Stem's significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• 35% of the business is held by the top 25 shareholders
• 40% of Stem is held by Institutions

Every investor in Stem, Inc. (NYSE:STEM) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 56% to be precise, is retail investors. Put another way, the group faces the maximum upside potential (or downside risk).

Meanwhile, institutions make up 40% of the company’s shareholders. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies.

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

Check out our latest analysis for Stem

What Does The Institutional Ownership Tell Us About Stem?

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.

We can see that Stem 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. 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 Stem, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Stem. BlackRock, Inc. is currently the largest shareholder, with 6.9% of shares outstanding. The Vanguard Group, Inc. is the second largest shareholder owning 5.3% of common stock, and State Street Global Advisors, Inc. holds about 3.0% of the company stock.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Stem

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.

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.

We can report that insiders do own shares in Stem, Inc.. As individuals, the insiders collectively own US$4.5m worth of the US$106m company. This shows at least some alignment, but we usually like to see larger insider holdings. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, mostly comprising of individual investors, collectively holds 56% of Stem shares. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

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 - Stem has 3 warning signs (and 2 which don't sit too well with us) we think you should know about.

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.