The big shareholder groups in CS Disco, Inc. (NYSE:LAW) have power over the company. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.
CS Disco has a market capitalization of US$2.9b, so we would expect some institutional investors to have noticed the stock. In the chart below, we can see that institutional investors have not yet purchased much of the company. Let's delve deeper into each type of owner, to discover more about CS Disco.
What Does The Institutional Ownership Tell Us About CS Disco?
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.
Since institutions own only a small portion of CS Disco, many may not have spent much time considering the stock. But it's clear that some have; and they liked it enough to buy in. So if the company itself can improve over time, we may well see more institutional buyers in the future. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.
We note that hedge funds don't have a meaningful investment in CS Disco. Our data shows that Deer Management Company, LLC is the largest shareholder with 19% of shares outstanding. In comparison, the second and third largest shareholders hold about 16% and 14% of the stock. Additionally, the company's CEO Kiwi Camara directly holds 6.9% of the total shares outstanding.
On looking further, we found that 60% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.
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 CS Disco
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 a reasonable proportion of CS Disco, Inc.. It is very interesting to see that insiders have a meaningful US$383m stake in this US$2.9b business. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public holds a 24% stake in CS Disco. 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.
Private Equity Ownership
With an ownership of 60%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.
It's always worth thinking about the different groups who own shares in a company. But to understand CS Disco better, we need to consider many other factors. Take risks for example - CS Disco has 4 warning signs (and 1 which is a bit unpleasant) we think you should know about.
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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.
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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