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Shareholders Should Check If Insiders Own Shares In Renren Inc (NYSE:RENN)

Gavin Beck

The big shareholder groups in Renren Inc (NYSE:RENN) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said ‘Show me the incentive and I will show you the outcome.’

Renren is not a large company by global standards. It has a market capitalization of US$102.1m, which means it wouldn’t have the attention of many institutional investors. In the chart below below, we can see that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about RENN.

View our latest analysis for Renren

NYSE:RENN Ownership Summary September 25th 18
NYSE:RENN Ownership Summary September 25th 18

What Does The Institutional Ownership Tell Us About Renren?

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.

Renren already has institutions on the share registry. Indeed, they own 7.1% of the company. 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. 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 Renren’s earnings history, below. Of course, the future is what really matters.

NYSE:RENN Income Statement Export September 25th 18
NYSE:RENN Income Statement Export September 25th 18

Hedge funds don’t have many shares in Renren. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Renren

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.

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 a reasonable proportion of Renren Inc. Insiders have a US$30.3m stake in this US$102.1m business. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public, with a 28.6% stake in the company, will not easily be ignored. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With a stake of 8.5%, private equity firms could influence the RENN board. 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.

Public Company Ownership

It appears to us that public companies own 26.1% of RENN. We can’t be certain, but this 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.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free .

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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.