Painful week for individual investors invested in Nikola Corporation (NASDAQ:NKLA) after 19% drop, institutions also suffered losses
Every investor in Nikola Corporation (NASDAQ:NKLA) should be aware of the most powerful shareholder groups. 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).
Following a 19% decrease in the stock price last week, individual investors suffered the most losses, but institutions who own 28% stock also took a hit.
In the chart below, we zoom in on the different ownership groups of Nikola.
See our latest analysis for Nikola
What Does The Institutional Ownership Tell Us About Nikola?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
We can see that Nikola does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Nikola's historic earnings and revenue below, but keep in mind there's always more to the story.
We note that hedge funds don't have a meaningful investment in Nikola. Looking at our data, we can see that the largest shareholder is Trevor Milton with 12% of shares outstanding. With 9.2% and 5.9% of the shares outstanding respectively, T&M Residual, Llc and CNH Industrial N.V. are the second and third largest shareholders.
On further inspection, we found that more than half the company's shares are owned by the top 9 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. 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 Nikola
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.
Our information suggests that insiders maintain a significant holding in Nikola Corporation. Insiders own US$208m worth of shares in the US$1.3b company. That's quite meaningful. 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
The general public-- including retail investors -- own 36% 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 Company Ownership
We can see that Private Companies own 14%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
Public Company Ownership
Public companies currently own 5.9% of Nikola stock. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.
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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Nikola (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
