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Institutional owners may consider drastic measures as DocuSign, Inc.'s (NASDAQ:DOCU) recent US$642m drop adds to long-term losses

If you want to know who really controls DocuSign, Inc. (NASDAQ:DOCU), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 77% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, institutional investors endured the highest losses last week after market cap fell by US$642m. The recent loss, which adds to a one-year loss of 81% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in DocuSign's 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 DocuSign.

View our latest analysis for DocuSign

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About DocuSign?

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.

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We can see that DocuSign 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. 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 DocuSign's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
earnings-and-revenue-growth

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. DocuSign is not owned by hedge funds. The Vanguard Group, Inc. is currently the largest shareholder, with 9.2% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.9% and 4.3% of the stock.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 23 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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 DocuSign

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.

Shareholders would probably be interested to learn that insiders own shares in DocuSign, Inc.. It is a very large company, and board members collectively own US$131m 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 21% 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 DocuSign better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for DocuSign 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.

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

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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