retail investors who own 28% along with institutions invested in REE Automotive Ltd. (NASDAQ:REE) saw increase in their holdings value last week

Key Insights

• The considerable ownership by retail investors in REE Automotive indicates that they collectively have a greater say in management and business strategy
• A total of 8 investors have a majority stake in the company with 50% ownership
• Institutions own 14% of REE Automotive

If you want to know who really controls REE Automotive Ltd. (NASDAQ:REE), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 28% to be precise, is retail investors. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While retail investors were the group that benefitted the most from last week’s US$75m market cap gain, institutions too had a 14% share in those profits.

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?

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.

As you can see, institutional investors have a fair amount of stake in REE Automotive. 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. 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 REE Automotive's historic earnings and revenue below, but keep in mind there's always more to the story.

REE Automotive is not owned by hedge funds. The company's largest shareholder is M&G Investment Management Limited, with ownership of 16%. In comparison, the second and third largest shareholders hold about 12% and 5.3% of the stock.

We also observed that the top 8 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

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. 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.

Our most recent data indicates that insiders own some shares in REE Automotive Ltd.. In their own names, insiders own US$10m worth of stock in the US$108m company. It is good to see some investment by insiders, but we usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.

General Public Ownership

With a 28% ownership, the general public, mostly comprising of individual investors, have some degree of sway over REE Automotive. 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 Company Ownership

Our data indicates that Private Companies hold 7.3%, 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.

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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with REE Automotive (at least 2 which make us uncomfortable) , and understanding them should be part of your investment process.

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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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.