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Given the large stake in the stock by institutions, PayPal Holdings’ stock price might be vulnerable to their trading decisions
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A total of 25 investors have a majority stake in the company with 42% ownership
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Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
A look at the shareholders of PayPal Holdings, Inc. (NASDAQ:PYPL) can tell us which group is most powerful. The group holding the most number of shares in the company, around 73% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Institutional investors endured the highest losses after the company’s market cap fell by US$4.2b last week. However, the 41% one-year returns may have helped alleviate their overall losses. But they would probably be wary of future losses.
Let’s take a closer look to see what the different types of shareholders can tell us about PayPal Holdings.
See our latest analysis for PayPal Holdings
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.
PayPal Holdings already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 PayPal Holdings, (below). Of course, keep in mind that there are other factors to consider, too.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. PayPal Holdings is not owned by hedge funds. Our data shows that The Vanguard Group, Inc. is the largest shareholder with 8.7% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 7.4% of common stock, and State Street Global Advisors, Inc. holds about 4.4% of the company stock.
A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.
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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 most recent data indicates that insiders own less than 1% of PayPal Holdings, Inc.. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$156m of stock. In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.
With a 27% ownership, the general public, mostly comprising of individual investors, have some degree of sway over PayPal Holdings. 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.
It’s always worth thinking about the different groups who own shares in a company. But to understand PayPal Holdings better, we need to consider many other factors.
I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.
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.
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