Key Insights

• The considerable ownership by private equity firms in CS Disco indicates that they collectively have a greater say in management and business strategy
• A total of 4 investors have a majority stake in the company with 51% ownership
• Insiders have sold recently

To get a sense of who is truly in control of CS Disco, Inc. (NYSE:LAW), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 51% to be precise, is private equity firms. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While institutions who own 27% came under pressure after market cap dropped to US$353m last week,private equity firms took the most losses.

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

What Does The Institutional Ownership Tell Us About CS Disco?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that CS Disco does have institutional investors; and they hold a good portion of the company's stock. 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. 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 CS Disco, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in CS Disco. The company's largest shareholder is Deer Management Company, LLC, with ownership of 14%. LiveOak Ventures is the second largest shareholder owning 14% of common stock, and The Stephens Group, LLC holds about 13% of the company stock.

On looking further, we found that 51% 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.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of CS Disco

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Our most recent data indicates that insiders own a reasonable proportion of CS Disco, Inc.. It has a market capitalization of just US$353m, and insiders have US$36m worth of shares in their own names. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 12% stake in CS Disco. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

Private equity firms hold a 51% stake in CS Disco. This suggests they can be influential in key policy decisions. 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.

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 2 warning signs for CS Disco 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.