Key Insights

• Given the large stake in the stock by institutions, Groupon's stock price might be vulnerable to their trading decisions
• The top 5 shareholders own 54% of the company
• Insider ownership in Groupon is 13%

A look at the shareholders of Groupon, Inc. (NASDAQ:GRPN) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 36% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 12% in value last week. However, the 181% one-year return to shareholders might have softened the blow. They should, however, be mindful of further losses in the future.

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

What Does The Institutional Ownership Tell Us About Groupon?

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 Groupon. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Groupon, (below). Of course, keep in mind that there are other factors to consider, too.

It would appear that 6.4% of Groupon shares are controlled by hedge funds. 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. Pale Fire Capital SE is currently the company's largest shareholder with 26% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 10% and 6.9%, of the shares outstanding, respectively. Eric Lefkofsky, who is the second-largest shareholder, also happens to hold the title of Top Key Executive. Furthermore, CEO Dusan Senkypl is the owner of 1.1% of the company's shares.

Our research also brought to light the fact that roughly 54% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Groupon

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 Groupon, Inc.. Insiders own US$58m worth of shares in the US$436m company. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 18% stake in the company, and hence can't easily be ignored. 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.

Private Equity Ownership

With an ownership of 26%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Groupon , and understanding them should be part of your investment process.

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.