To get a sense of who is truly in control of The Honest Company, Inc. (NASDAQ:HNST), 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 37% ownership. 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.
Let's delve deeper into each type of owner of Honest Company, beginning with the chart below.
What Does The Institutional Ownership Tell Us About Honest Company?
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.
We can see that Honest Company does have institutional investors; and they hold a good portion of the company's stock. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Honest Company's earnings history below. Of course, the future is what really matters.
Honest Company is not owned by hedge funds. L Catterton Partners is currently the company's largest shareholder with 13% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 11% and 5.3%, of the shares outstanding, respectively. Jessica Warren, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.
On further inspection, we found that more than half the company's shares are owned by the top 10 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Honest Company
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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 most recent data indicates that insiders own a reasonable proportion of The Honest Company, Inc.. Insiders own US$41m worth of shares in the US$309m company. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.
General Public Ownership
The general public-- including retail investors -- own 26% stake in the company, and hence can't easily be ignored. 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
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. Case in point: We've spotted 4 warning signs for Honest Company you should be aware of.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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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