ChromaDex Corporation's (NASDAQ:CDXC) market cap rose US$16m last week; individual investors who hold 36% profited and so did insiders
To get a sense of who is truly in control of ChromaDex Corporation (NASDAQ:CDXC), it is important to understand the ownership structure of the business. We can see that individual investors own the lion's share in the company with 36% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Individual investors gained the most after market cap touched US$122m last week, while insiders who own 28% also benefitted.
In the chart below, we zoom in on the different ownership groups of ChromaDex.
Check out our latest analysis for ChromaDex
What Does The Institutional Ownership Tell Us About ChromaDex?
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.
We can see that ChromaDex does have institutional investors; and they hold a good portion of the company's stock. 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. 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 ChromaDex, (below). Of course, keep in mind that there are other factors to consider, too.
ChromaDex is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Ka-shing Li with 11% of shares outstanding. With 11% and 5.1% of the shares outstanding respectively, Hoi Shuen Chau and Nestlé S.A. are the second and third largest shareholders. Additionally, the company's CEO Robert Fried directly holds 2.1% of the total shares outstanding.
After doing some more digging, we found that the top 11 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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of ChromaDex
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.
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.
It seems insiders own a significant proportion of ChromaDex Corporation. It has a market capitalization of just US$122m, and insiders have US$34m worth of shares in their own names. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.
General Public Ownership
With a 36% ownership, the general public, mostly comprising of individual investors, have some degree of sway over ChromaDex. 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 Company Ownership
It seems that Private Companies own 5.0%, of the ChromaDex stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.
Public Company Ownership
We can see that public companies hold 5.1% of the ChromaDex shares on issue. 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:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - ChromaDex has 2 warning signs we think you should be aware of.
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.
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.
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