Yahoo Finance The Honest Company, Inc.'s (NASDAQ:HNST) market cap dropped US$92m last week; individual investors who hold 34% were hit as were institutions
Key Insights
The considerable ownership by retail investors in Honest Company indicates that they collectively have a greater say in management and business strategy
A total of 12 investors have a majority stake in the company with 50% ownership
If you want to know who really controls The Honest Company, Inc. (NASDAQ:HNST), then you'll have to look at the makeup of its share registry. We can see that retail investors own the lion's share in the company with 34% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Following a 36% decrease in the stock price last week, retail investors suffered the most losses, but institutions who own 34% stock also took a hit.
Let's take a closer look to see what the different types of shareholders can tell us about Honest Company.
View our latest analysis for Honest Company
What Does The Institutional Ownership Tell Us About Honest Company?
Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.
Honest Company 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. 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 Honest Company, (below). Of course, keep in mind that there are other factors to consider, too.
Hedge funds don't have many shares in Honest Company. Our data shows that L Catterton Partners is the largest shareholder with 13% of shares outstanding. For context, the second largest shareholder holds about 11% of the shares outstanding, followed by an ownership of 4.9% by the third-largest shareholder.
Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 12 shareholders, meaning that no single shareholder has a majority interest in the ownership.
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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Honest Company
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
We can see that insiders own shares in The Honest Company, Inc.. In their own names, insiders own US$12m worth of stock in the US$162m 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 34% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Honest Company. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Equity Ownership
Private equity firms hold a 24% stake in Honest Company. This suggests they can be influential in key policy decisions. 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:
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. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Honest Company , and understanding them should be part of your investment process.
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.
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