Key Insights

• Significantly high institutional ownership implies DigitalOcean Holdings' stock price is sensitive to their trading actions
• The top 7 shareholders own 51% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

To get a sense of who is truly in control of DigitalOcean Holdings, Inc. (NYSE:DOCN), 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 53% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.

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

What Does The Institutional Ownership Tell Us About DigitalOcean Holdings?

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.

As you can see, institutional investors have a fair amount of stake in DigitalOcean Holdings. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at DigitalOcean Holdings' earnings history below. Of course, the future is what really matters.

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 DigitalOcean Holdings. Access Industries, Inc. is currently the largest shareholder, with 28% of shares outstanding. The Vanguard Group, Inc. is the second largest shareholder owning 7.4% of common stock, and BlackRock, Inc. holds about 5.3% of the company stock.

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 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of DigitalOcean Holdings

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 some shares in DigitalOcean Holdings, Inc.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around US$142m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

With a 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over DigitalOcean Holdings. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

We can see that Private Companies own 28%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand DigitalOcean Holdings better, we need to consider many other factors. For instance, we've identified 4 warning signs for DigitalOcean Holdings (2 don't sit too well with us) that 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.

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