Every investor in Rent the Runway, Inc. (NASDAQ:RENT) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 41% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
After a year of 78% losses, last week’s 73% 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 Rent the Runway.
What Does The Institutional Ownership Tell Us About Rent the Runway?
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.
Rent the Runway 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. 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 Rent the Runway's earnings history below. Of course, the future is what really matters.
Our data indicates that hedge funds own 11% of Rent the Runway. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. The company's largest shareholder is Bain Capital, LP, with ownership of 13%. With 7.8% and 7.5% of the shares outstanding respectively, Highland Capital Partners LLC and T. Rowe Price Group, Inc. are the second and third largest shareholders. Furthermore, CEO Jennifer Hyman is the owner of 1.9% of the company's shares.
On further inspection, we found that more than half the company's shares are owned by the top 8 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Rent the Runway
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 Rent the Runway, Inc.. It has a market capitalization of just US$153m, and insiders have US$7.9m worth of shares, in their own names. 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 16% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Rent the Runway. 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 27%, private equity firms could influence the Rent the Runway 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.
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. To that end, you should learn about the 4 warning signs we've spotted with Rent the Runway (including 2 which can't be ignored) .
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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