Yahoo Finance With 56% ownership of the shares, Redfin Corporation (NASDAQ:RDFN) is heavily dominated by institutional owners
Key Insights
Given the large stake in the stock by institutions, Redfin's stock price might be vulnerable to their trading decisions
A total of 25 investors have a majority stake in the company with 48% ownership
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
To get a sense of who is truly in control of Redfin Corporation (NASDAQ:RDFN), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 56% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.
Let's delve deeper into each type of owner of Redfin, beginning with the chart below.
Check out our latest analysis for Redfin
What Does The Institutional Ownership Tell Us About Redfin?
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.
Redfin already has institutions on the share registry. Indeed, they own a respectable stake in 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. 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 Redfin's historic earnings and revenue below, but keep in mind there's always more to the story.
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 Redfin. The Vanguard Group, Inc. is currently the company's largest shareholder with 16% of shares outstanding. For context, the second largest shareholder holds about 7.2% of the shares outstanding, followed by an ownership of 2.3% by the third-largest shareholder. Furthermore, CEO Glenn Kelman is the owner of 1.2% of the company's shares.
On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.
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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Redfin
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.
Shareholders would probably be interested to learn that insiders own shares in Redfin Corporation. It has a market capitalization of just US$708m, and insiders have US$31m worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.
General Public Ownership
With a 40% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Redfin. 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.
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. For instance, we've identified 3 warning signs for Redfin (1 makes us a bit uncomfortable) that you should be aware of.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
