Key Insights

• Significantly high institutional ownership implies AvidXchange Holdings' stock price is sensitive to their trading actions
• 51% of the business is held by the top 11 shareholders
• Recent sales by insiders

A look at the shareholders of AvidXchange Holdings, Inc. (NASDAQ:AVDX) can tell us which group is most powerful. The group holding the most number of shares in the company, around 76% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors endured the highest losses after the company's share price fell by 3.5% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 5.2% for shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in AvidXchange Holdings' share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

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

What Does The Institutional Ownership Tell Us About AvidXchange 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.

We can see that AvidXchange Holdings 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 AvidXchange Holdings' 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. It would appear that 5.2% of AvidXchange Holdings 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. The Vanguard Group, Inc. is currently the largest shareholder, with 8.7% of shares outstanding. In comparison, the second and third largest shareholders hold about 6.9% and 6.7% of the stock. Michael Praeger, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 11 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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 AvidXchange 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 AvidXchange Holdings, Inc.. This is a big company, so it is good to see this level of alignment. Insiders own US$199m worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 10% stake in AvidXchange Holdings. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with AvidXchange Holdings .

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.