Recent uptick might appease The RealReal, Inc. (NASDAQ:REAL) institutional owners after losing 10% over the past year
Key Insights
Given the large stake in the stock by institutions, RealReal's stock price might be vulnerable to their trading decisions
A total of 23 investors have a majority stake in the company with 50% ownership
A look at the shareholders of The RealReal, Inc. (NASDAQ:REAL) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 47% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Last week's US$37m market cap gain would probably be appreciated by institutional investors, especially after a year of 10% losses.
In the chart below, we zoom in on the different ownership groups of RealReal.
See our latest analysis for RealReal
What Does The Institutional Ownership Tell Us About RealReal?
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 RealReal 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. 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 RealReal's historic earnings and revenue below, but keep in mind there's always more to the story.
RealReal is not owned by hedge funds. The company's largest shareholder is GreyLion Capital LP, with ownership of 7.3%. For context, the second largest shareholder holds about 5.7% of the shares outstanding, followed by an ownership of 4.5% by the third-largest shareholder.
After doing some more digging, we found that the top 23 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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of RealReal
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our most recent data indicates that insiders own some shares in The RealReal, Inc.. In their own names, insiders own US$17m worth of stock in the US$267m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.
General Public Ownership
The general public-- including retail investors -- own 40% 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 an ownership of 7.3%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand RealReal better, we need to consider many other factors. For example, we've discovered 4 warning signs for RealReal (2 are a bit concerning!) that you should be aware of before investing here.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.
