Significant control over Freshworks by private equity firms implies that the general public has more power to influence management and governance-related decisions
A look at the shareholders of Freshworks Inc. (NASDAQ:FRSH) can tell us which group is most powerful. The group holding the most number of shares in the company, around 38% 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.
Private equity firms gained the most after market cap touched US$5.0b last week, while institutions who own 32% also benefitted.
Let's delve deeper into each type of owner of Freshworks, beginning with the chart below.
What Does The Institutional Ownership Tell Us About Freshworks?
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.
Freshworks 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Freshworks' earnings history below. Of course, the future is what really matters.
NasdaqGS:FRSH Earnings and Revenue Growth July 29th 2023
Our data indicates that hedge funds own 14% of Freshworks. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. The company's largest shareholder is Accel Partners, with ownership of 18%. With 14% and 7.4% of the shares outstanding respectively, Tiger Global Management, LLC and Sequoia Capital Operations LLC are the second and third largest shareholders. In addition, we found that Rathna Mathrubootham, the CEO has 5.0% of the shares allocated to their name.
Our research also brought to light the fact that roughly 52% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.
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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Freshworks
The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
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 some shares in Freshworks Inc.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around US$313m worth of shares (at current prices). 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-- including retail investors -- own 10% 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.
Private Equity Ownership
With a stake of 38%, private equity firms could influence the Freshworks board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company 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. For example, we've discovered 2 warning signs for Freshworks that you should be aware of before investing here.
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.
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