Key Insights

• Given the large stake in the stock by institutions, Snowflake's stock price might be vulnerable to their trading decisions
• A total of 25 investors have a majority stake in the company with 41% ownership
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

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To get a sense of who is truly in control of Snowflake Inc. (NYSE:SNOW), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 65% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, institutional investors ended up benefitting the most after the company hit US$53b in market cap. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 1.0%.

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

Check out our latest analysis for Snowflake

What Does The Institutional Ownership Tell Us About Snowflake?

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.

Snowflake already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Snowflake's historic earnings and revenue below, but keep in mind there's always more to the story.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Snowflake is not owned by hedge funds. The company's largest shareholder is The Vanguard Group, Inc., with ownership of 8.1%. Meanwhile, the second and third largest shareholders, hold 5.6% and 2.3%, of the shares outstanding, respectively.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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

Insider Ownership Of Snowflake

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.

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 see that insiders own shares in Snowflake Inc.. Insiders own US$2.3b worth of shares (at current prices). It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 31% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Snowflake. 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 Snowflake better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Snowflake .

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.