Key Insights

• Significantly high institutional ownership implies Groupon's stock price is sensitive to their trading actions
• 51% of the business is held by the top 4 shareholders
• Insiders have been buying lately

To get a sense of who is truly in control of Groupon, Inc. (NASDAQ:GRPN), it is important to understand the ownership structure of the business. With 41% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors saw their holdings value drop by 14% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 15% might not go down well especially with this category of shareholders. Often called "market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the decline continues, institutional investors may be pressured to sell Groupon which might hurt individual investors.

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 suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 8.6% of Groupon 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. Our data shows that Pale Fire Capital SE is the largest shareholder with 26% of shares outstanding. For context, the second largest shareholder holds about 9.9% of the shares outstanding, followed by an ownership of 8.6% by the third-largest shareholder. Eric Lefkofsky, who is the second-largest shareholder, also happens to hold the title of Top Key Executive. Additionally, the company's CEO Dusan Senkypl directly holds 1.1% of the total shares outstanding.

Our research also brought to light the fact that roughly 51% of the company is controlled by the top 4 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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Groupon

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our information suggests that insiders maintain a significant holding in Groupon, Inc.. Insiders have a US$53m stake in this US$395m business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 11% stake in Groupon. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

Private equity firms hold a 26% stake in Groupon. This suggests they can be influential in key policy decisions. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 2 warning signs for Groupon that you should be aware of before investing here.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.