REE Automotive Ltd.'s (NASDAQ:REE) institutional investors lost 23% over the past week but have profited from longer-term gains

Key Insights

• Given the large stake in the stock by institutions, REE Automotive's stock price might be vulnerable to their trading decisions
• The top 4 shareholders own 57% of the company
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

To get a sense of who is truly in control of REE Automotive Ltd. (NASDAQ:REE), it is important to understand the ownership structure of the business. With 28% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Institutional investors endured the highest losses after the company's market cap fell by US$47m last week. Still, the 36% one-year gains may have helped mitigate their overall losses. But they would probably be wary of future losses.

Let's delve deeper into each type of owner of REE Automotive, beginning with the chart below.

Check out our latest analysis for REE Automotive

What Does The Institutional Ownership Tell Us About REE Automotive?

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.

REE Automotive 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 REE Automotive's earnings history below. Of course, the future is what really matters.

It looks like hedge funds own 8.5% of REE Automotive shares. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Our data shows that M&G Investment Management Limited is the largest shareholder with 21% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 20% and 8.5%, of the shares outstanding, respectively.

On looking further, we found that 57% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of REE Automotive

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

We can see that insiders own shares in REE Automotive Ltd.. As individuals, the insiders collectively own US$16m worth of the US$171m company. This shows at least some alignment, but we usually like to see larger insider holdings. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 26% ownership, the general public, mostly comprising of individual investors, have some degree of sway over REE Automotive. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

Our data indicates that Private Companies hold 8.1%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Public Company Ownership

We can see that public companies hold 20% of the REE Automotive shares on issue. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand REE Automotive better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for REE Automotive (of which 3 are a bit concerning!) you should know about.

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.