Yahoo Finance Positive week for The RealReal, Inc. (NASDAQ:REAL) institutional investors who lost 78% over the past year
Key Insights
Given the large stake in the stock by institutions, RealReal's stock price might be vulnerable to their trading decisions
The top 14 shareholders own 51% of the company
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
If you want to know who really controls The RealReal, Inc. (NASDAQ:REAL), then you'll have to look at the makeup of its share registry. With 60% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
After a year of 78% losses, last week’s 25% gain would be welcomed by institutional investors as a likely sign that returns might start trending higher.
Let's take a closer look to see what the different types of shareholders can tell us about RealReal.
View our latest analysis for RealReal
What Does The Institutional Ownership Tell Us About RealReal?
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.
RealReal already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 RealReal's historic earnings and revenue below, but keep in mind there's always more to the story.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. RealReal is not owned by hedge funds. GreyLion Capital LP is currently the largest shareholder, with 7.5% of shares outstanding. With 6.4% and 5.2% of the shares outstanding respectively, BlackRock, Inc. and The Vanguard Group, Inc. are the second and third largest shareholders.
A closer look at our ownership figures suggests that the top 14 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. 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 RealReal
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. 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 The RealReal, Inc.. In their own names, insiders own US$6.3m worth of stock in the US$162m company. It is good to see some investment by insiders, but we usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.
General Public Ownership
The general public, who are usually individual investors, hold a 29% stake in RealReal. 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 a stake of 7.5%, private equity firms could influence the RealReal board. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with RealReal (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.
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.
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