Stock Analysis

Lordstown Motors Corp.'s (NASDAQ:RIDE) 13% loss last week hit both individual investors who own 52% as well as institutions

  •  Updated
NasdaqGS:RIDE
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If you want to know who really controls Lordstown Motors Corp. (NASDAQ:RIDE), then you'll have to look at the makeup of its share registry. With 52% stake, individual investors 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.

While institutions who own 29% came under pressure after market cap dropped to US$381m last week,individual investors took the most losses.

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

If you're not interested in researching RIDE's ownership structure, we have a free list of interesting investing ideas to potentially inspire your next investment!

ownership-breakdown
NasdaqGS:RIDE Ownership Breakdown September 24th 2022

What Does The Institutional Ownership Tell Us About Lordstown Motors?

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 Lordstown Motors does have institutional investors; and they hold a good portion of the company's stock. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Lordstown Motors, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NasdaqGS:RIDE Earnings and Revenue Growth September 24th 2022

We note that hedge funds don't have a meaningful investment in Lordstown Motors. Stephen Burns is currently the largest shareholder, with 16% of shares outstanding. For context, the second largest shareholder holds about 4.9% of the shares outstanding, followed by an ownership of 4.4% by the third-largest shareholder.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Lordstown Motors

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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.

It seems insiders own a significant proportion of Lordstown Motors Corp.. Insiders own US$70m worth of shares in the US$381m company. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public -- including retail investors -- own 52% of Lordstown Motors. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Lordstown Motors better, we need to consider many other factors. For instance, we've identified 5 warning signs for Lordstown Motors (2 are a bit concerning) that 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.

Valuation is complex, but we're helping make it simple.

Find out whether Lordstown Motors is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About NasdaqGS:RIDE

Lordstown Motors

Lordstown Motors Corp. develops, manufactures, and sells Endurance, an electric full-size pickup truck for fleet customers.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation2
Future Growth2
Past Performance0
Financial Health5
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Excellent balance sheet and slightly overvalued.