Given the large stake in the stock by institutions, TrueCar's stock price might be vulnerable to their trading decisions
52% of the business is held by the top 5 shareholders
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
If you want to know who really controls TrueCar, Inc. (NASDAQ:TRUE), then you'll have to look at the makeup of its share registry. With 51% stake, institutions possess the maximum shares in the company. 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. 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 TrueCar, beginning with the chart below.
NasdaqGS:TRUE Ownership Breakdown November 27th 2023
What Does The Institutional Ownership Tell Us About TrueCar?
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.
As you can see, institutional investors have a fair amount of stake in TrueCar. 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 TrueCar's historic earnings and revenue below, but keep in mind there's always more to the story.
NasdaqGS:TRUE Earnings and Revenue Growth November 27th 2023
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. It looks like hedge funds own 30% of TrueCar shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Caledonia (Private) Investments Pty Limited is currently the largest shareholder, with 20% of shares outstanding. With 9.3% and 8.8% of the shares outstanding respectively, Cannell Capital LLC and USAA Investment Services Company are the second and third largest shareholders.
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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of TrueCar
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. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
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 TrueCar, Inc.. It has a market capitalization of just US$239m, and insiders have US$7.0m worth of shares, in their own names. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.
General Public Ownership
With a 11% ownership, the general public, mostly comprising of individual investors, have some degree of sway over TrueCar. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Public Company Ownership
We can see that public companies hold 5.9% of the TrueCar shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand TrueCar better, we need to consider many other factors. For instance, we've identified 2 warning signs for TrueCar that you should be aware of.
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.
