Here's What Red Violet, Inc.'s (NASDAQ:RDVT) Shareholder Ownership Structure Looks Like

A look at the shareholders of Red Violet, Inc. (NASDAQ:RDVT) can tell us which group is most powerful. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

Red Violet is not a large company by global standards. It has a market capitalization of US$306m, which means it wouldn't have the attention of many institutional investors. In the chart below, we can see that institutions are noticeable on the share registry. Let's take a closer look to see what the different types of shareholders can tell us about Red Violet.

See our latest analysis for Red Violet

What Does The Institutional Ownership Tell Us About Red Violet?

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.

Red Violet already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Red Violet's earnings history below. Of course, the future is what really matters.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in Red Violet. Our data shows that Greater Miami Jewish Federation, Inc., Endowment Arm is the largest shareholder with 21% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 10% and 6.9%, of the shares outstanding, respectively. In addition, we found that Derek Dubner, the CEO has 2.8% of the shares allocated to their name.

We did some more digging and found that 6 of the top shareholders account for roughly 50% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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. As far I can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Red Violet

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own a reasonable proportion of Red Violet, Inc.. Insiders own US$56m worth of shares in the US$306m company. I 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 holds a 23% stake in Red Violet. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Red Violet , and understanding them should be part of your investment process.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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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