Key Insights

• Given the large stake in the stock by institutions, Shopify's stock price might be vulnerable to their trading decisions
• 49% of the business is held by the top 25 shareholders
• Recent sales by insiders

To get a sense of who is truly in control of Shopify Inc. (NYSE:SHOP), 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 66% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, institutional investors ended up benefitting the most after the company hit US$139b in market cap. One-year return to shareholders is currently 29% and last week’s gain was the icing on the cake.

Let's delve deeper into each type of owner of Shopify, beginning with the chart below.

View our latest analysis for Shopify

What Does The Institutional Ownership Tell Us About Shopify?

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 Shopify does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Shopify's historic earnings and revenue below, but keep in mind there's always more to the story.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in Shopify. Looking at our data, we can see that the largest shareholder is Capital Research and Management Company with 9.6% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 6.2% and 4.9%, of the shares outstanding, respectively. Tobias Lütke, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Shopify

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our most recent data indicates that insiders own some shares in Shopify Inc.. Insiders own US$8.7b worth of shares (at current prices). Most would say this shows a good alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 28% stake in the company, and hence can't easily be ignored. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Shopify better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Shopify you should be aware of.

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.