Yahoo Finance Institutional investors control 51% of TrueCar, Inc. (NASDAQ:TRUE) and were rewarded last week after stock increased 13%
Key Insights
Given the large stake in the stock by institutions, TrueCar's stock price might be vulnerable to their trading decisions
The top 5 shareholders own 52% of the company
Every investor in TrueCar, Inc. (NASDAQ:TRUE) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 51% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
And as as result, institutional investors reaped the most rewards after the company's stock price gained 13% last week. The one-year return on investment is currently 26% and last week's gain would have been more than welcomed.
In the chart below, we zoom in on the different ownership groups of TrueCar.
View our latest analysis for TrueCar
What Does The Institutional Ownership Tell Us About TrueCar?
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 TrueCar does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 TrueCar, (below). Of course, keep in mind that there are other factors to consider, too.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. It looks like hedge funds own 29% of TrueCar shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Our data shows that Caledonia (Private) Investments Pty Limited is the largest shareholder with 20% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 9.3% and 8.7%, of the shares outstanding, respectively.
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 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 TrueCar
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. 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.
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 TrueCar, Inc.. It has a market capitalization of just US$276m, and insiders have US$5.1m worth of shares, in their own names. 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 12% 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.
Public Company Ownership
We can see that public companies hold 5.9% of the TrueCar shares on issue. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should be aware of the 3 warning signs we've spotted with TrueCar .
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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.
