Key Insights

• Given the large stake in the stock by institutions, Cerence's stock price might be vulnerable to their trading decisions
• A total of 13 investors have a majority stake in the company with 51% ownership
• Recent sales by insiders

A look at the shareholders of Cerence Inc. (NASDAQ:CRNC) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 84% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

After a year of 66% losses, last week's 91% gain would be welcomed by institutional investors as a possible sign that returns might start trending higher.

In the chart below, we zoom in on the different ownership groups of Cerence.

What Does The Institutional Ownership Tell Us About Cerence?

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.

Cerence 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 Cerence, (below). Of course, keep in mind that there are other factors to consider, too.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Cerence is not owned by hedge funds. Our data shows that American Capital Management, Inc. is the largest shareholder with 9.4% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.9% and 7.4% of the stock.

After doing some more digging, we found that the top 13 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over 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 Cerence

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

Shareholders would probably be interested to learn that insiders own shares in Cerence Inc.. In their own names, insiders own US$9.1m worth of stock in the US$244m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 12% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Cerence. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Cerence better, we need to consider many other factors. For example, we've discovered 3 warning signs for Cerence (1 is significant!) that you should be aware of before investing here.

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.