Home Private Equity Painful week for private equity firms invested in Udemy, Inc. (NASDAQ:UDMY) after...

Painful week for private equity firms invested in Udemy, Inc. (NASDAQ:UDMY) after 16% drop, institutions also suffered losses

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Simply Wall St

A look at the shareholders of Udemy, Inc. (NASDAQ:UDMY) can tell us which group is most powerful. The group holding the most number of shares in the company, around 36% to be precise, is private equity firms. Put another way, the group faces the maximum upside potential (or downside risk).

Following a 16% decrease in the stock price last week, private equity firms suffered the most losses, but institutions who own 28% stock also took a hit.

Let’s take a closer look to see what the different types of shareholders can tell us about Udemy.

If you’re not interested in researching UDMY’s ownership structure, we have a free list of interesting investing ideas to potentially inspire your next investment!

ownership-breakdown
NasdaqGS:UDMY Ownership Breakdown September 24th 2022

What Does The Institutional Ownership Tell Us About Udemy?

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.

As you can see, institutional investors have a fair amount of stake in Udemy. 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 Udemy’s historic earnings and revenue below, but keep in mind there’s always more to the story.

earnings-and-revenue-growth
NasdaqGS:UDMY Earnings and Revenue Growth September 24th 2022

We note that hedge funds don’t have a meaningful investment in Udemy. Insight Venture Management, LLC is currently the company’s largest shareholder with 30% of shares outstanding. In comparison, the second and third largest shareholders hold about 12% and 6.6% of the stock.

To make our study more interesting, we found that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company’s decision-making.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Udemy

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.

We can report that insiders do own shares in Udemy, Inc.. The insiders have a meaningful stake worth US$35m. Most would see this as a real positive. If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 21% stake in Udemy. 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.

Private Equity Ownership

Private equity firms hold a 36% stake in Udemy. 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.

Public Company Ownership

It appears to us that public companies own 12% of Udemy. We can’t be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

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 Udemy 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.

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.

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