Yahoo Finance ThredUp Inc. (NASDAQ:TDUP) is favoured by institutional owners who hold 60% of the company
Key Insights
Given the large stake in the stock by institutions, ThredUp's stock price might be vulnerable to their trading decisions
51% of the business is held by the top 8 shareholders
Every investor in ThredUp Inc. (NASDAQ:TDUP) should be aware of the most powerful shareholder groups. With 60% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Given the vast amount of money and research capacities at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.
In the chart below, we zoom in on the different ownership groups of ThredUp.
Check out our latest analysis for ThredUp
What Does The Institutional Ownership Tell Us About ThredUp?
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.
As you can see, institutional investors have a fair amount of stake in ThredUp. 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. 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 ThredUp, (below). Of course, keep in mind that there are other factors to consider, too.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in ThredUp. Capital Research and Management Company is currently the company's largest shareholder with 7.8% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.6% and 7.0%, of the shares outstanding, respectively. Additionally, the company's CEO James Reinhart directly holds 3.8% of the total shares outstanding.
On further inspection, we found that more than half the company's shares are owned by the top 8 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
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 ThredUp
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.
Shareholders would probably be interested to learn that insiders own shares in ThredUp Inc.. As individuals, the insiders collectively own US$15m worth of the US$184m company. Some would say this shows alignment of interests between shareholders and the board, though we generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.
General Public Ownership
With a 11% ownership, the general public, mostly comprising of individual investors, have some degree of sway over ThredUp. 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 21%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.
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 - ThredUp 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.
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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.
