Richtech Robotics Inc.'s (NASDAQ:RR) stock price dropped 12% last week; individual investors would not be happy

Key Insights

• The considerable ownership by individual investors in Richtech Robotics indicates that they collectively have a greater say in management and business strategy
• 40% of the business is held by the top 25 shareholders
• Insiders have sold recently

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A look at the shareholders of Richtech Robotics Inc. (NASDAQ:RR) can tell us which group is most powerful. The group holding the most number of shares in the company, around 59% to be precise, is individual investors. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While insiders who own 29% came under pressure after market cap dropped to US$300m last week,individual investors took the most losses.

In the chart below, we zoom in on the different ownership groups of Richtech Robotics.

Check out our latest analysis for Richtech Robotics

What Does The Institutional Ownership Tell Us About Richtech Robotics?

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 Richtech Robotics does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Richtech Robotics' historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Richtech Robotics. The company's CEO Zhenwu Huang is the largest shareholder with 20% of shares outstanding. With 5.3% and 3.0% of the shares outstanding respectively, Zhenqiang Huang and BlackRock, Inc. are the second and third largest shareholders. Interestingly, the second-largest shareholder, Zhenqiang Huang is also Top Key Executive, again, pointing towards strong insider ownership amongst the company's top shareholders.

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 Richtech Robotics

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

Our information suggests that insiders maintain a significant holding in Richtech Robotics Inc.. Insiders have a US$87m stake in this US$300m business. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a substantial 59% stake in Richtech Robotics, suggesting it is a fairly popular stock. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 5 warning signs for Richtech Robotics (1 is significant) that you should be aware of.

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.