Yahoo Finance Institutional owners may consider drastic measures as Rocket Lab USA, Inc.'s (NASDAQ:RKLB) recent US$71m drop adds to long-term losses
A look at the shareholders of Rocket Lab USA, Inc. (NASDAQ:RKLB) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 29% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
And institutional investors endured the highest losses after the company's share price fell by 4.0% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 70% might not go down well especially with this category of shareholders. Often called “market makers”, institutions wield significant power in influencing the price dynamics of any stock. As a result, if the downtrend continues, institutions may face pressures to sell Rocket Lab USA, which might have negative implications on individual investors.
Let's delve deeper into each type of owner of Rocket Lab USA, beginning with the chart below.
View our latest analysis for Rocket Lab USA
What Does The Institutional Ownership Tell Us About Rocket Lab USA?
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.
Rocket Lab USA already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Rocket Lab USA's historic earnings and revenue below, but keep in mind there's always more to the story.
We note that hedge funds don't have a meaningful investment in Rocket Lab USA. Our data shows that Khosla Ventures, LLC is the largest shareholder with 16% of shares outstanding. Deer Management Company, LLC is the second largest shareholder owning 12% of common stock, and Peter Beck holds about 12% of the company stock. Peter Beck, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.
To make our study more interesting, we found that the top 5 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.
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 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 Rocket Lab USA
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 information suggests that insiders maintain a significant holding in Rocket Lab USA, Inc.. It is very interesting to see that insiders have a meaningful US$204m stake in this US$1.7b business. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.
General Public Ownership
With a 22% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Rocket Lab USA. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
Private Equity Ownership
With a stake of 28%, private equity firms could influence the Rocket Lab USA board. 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:
It's always worth thinking about the different groups who own shares in a company. But to understand Rocket Lab USA better, we need to consider many other factors. Be aware that Rocket Lab USA is showing 3 warning signs in our investment analysis , you should know about...
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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