Key Insights

• Given the large stake in the stock by institutions, Chegg's stock price might be vulnerable to their trading decisions
• 50% of the business is held by the top 16 shareholders
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

A look at the shareholders of Chegg, Inc. (NYSE:CHGG) can tell us which group is most powerful. The group holding the most number of shares in the company, around 80% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Given the vast amount of money and research capacities at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.

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

View our latest analysis for Chegg

What Does The Institutional Ownership Tell Us About Chegg?

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 Chegg does have institutional investors; and they hold a good portion of the company's stock. 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Chegg's historic earnings and revenue below, but keep in mind there's always more to the story.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Chegg is not owned by hedge funds. The Vanguard Group, Inc. is currently the company's largest shareholder with 9.2% of shares outstanding. For context, the second largest shareholder holds about 7.2% of the shares outstanding, followed by an ownership of 4.9% by the third-largest shareholder. Furthermore, CEO Nathan Schultz is the owner of 1.8% of the company's shares.

After doing some more digging, we found that the top 16 have the combined ownership of 50% 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 Chegg

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.

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 Chegg, Inc.. As individuals, the insiders collectively own US$7.2m worth of the US$144m company. It is good to see some investment by insiders, but we usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 15% stake in the company, and hence can't easily be ignored. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Chegg better, we need to consider many other factors. For instance, we've identified 2 warning signs for Chegg that you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.