Institutional investors in Salesforce, Inc. (NYSE:CRM) see US$24b decrease in market cap last week, although long-term gains have benefitted them.

Key Insights

• Institutions’ substantial holdings in Salesforce implies that they have significant influence over the company’s share price

• The top 25 shareholders own 50% of the company

• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

To get a sense of who is truly in control of Salesforce, Inc. (NYSE:CRM), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 82% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 8.3% in value last week. Still, the 40% one-year gains may have helped mitigate their overall losses. We would assume however, that they would be on the lookout for weakness in the future.

Let’s take a closer look to see what the different types of shareholders can tell us about Salesforce.

Check out our latest analysis for Salesforce

What Does The Institutional Ownership Tell Us About Salesforce?

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.

Salesforce already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Salesforce’s earnings history below. Of course, the future is what really matters.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Salesforce is not owned by hedge funds. The company’s largest shareholder is The Vanguard Group, Inc., with ownership of 8.6%. For context, the second largest shareholder holds about 7.5% of the shares outstanding, followed by an ownership of 4.7% by the third-largest shareholder. In addition, we found that Marc Benioff, the CEO has 2.4% of the shares allocated to their name.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 25 shareholders, meaning that no single shareholder has a majority interest in the ownership.

Story continues

Researching institutional ownership is a good way to gauge and filter a stock’s expected performance. The same can be achieved by studying analyst sentiments. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Salesforce

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

We can report that insiders do own shares in Salesforce, Inc.. It is a very large company, and board members collectively own US$7.2b worth of shares (at current prices). we sometimes take an interest in whether they have been buying or selling.

General Public Ownership

With a 15% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Salesforce. 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. For example, we’ve discovered 1 warning sign for Salesforce that you should be aware of before investing here.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.