To get a sense of who is truly in control of Airbnb, Inc. (NASDAQ:ABNB), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 41% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$65b last week after a 14% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 42% might not go down well especially with this category of shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell Airbnb which might hurt individual investors.
In the chart below, we zoom in on the different ownership groups of Airbnb.
NasdaqGS:ABNB Ownership Breakdown September 25th 2022
What Does The Institutional Ownership Tell Us About Airbnb?
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.
Airbnb 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. 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 Airbnb, (below). Of course, keep in mind that there are other factors to consider, too.
NasdaqGS:ABNB Earnings and Revenue Growth September 25th 2022
We note that hedge funds don't have a meaningful investment in Airbnb. Looking at our data, we can see that the largest shareholder is the CEO Brian Chesky with 10% of shares outstanding. For context, the second largest shareholder holds about 9.8% of the shares outstanding, followed by an ownership of 9.4% by the third-largest shareholder. Note that two of the top three shareholders are also Top Key Executive and Member of the Board of Directors, respectively, once again pointing to significant ownership by company insiders.
We also observed that the top 9 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.
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 Airbnb
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.
It seems insiders own a significant proportion of Airbnb, Inc.. Insiders own US$20b worth of shares in the US$65b company. That's quite meaningful. 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
With a 20% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Airbnb. 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.
Private Equity Ownership
With a stake of 7.4%, private equity firms could influence the Airbnb board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Airbnb , and understanding them should be part of your investment process.
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.
Join A Paid User Research Session You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
