Redwoods Acquisition Corp.'s (NASDAQ:RWOD) market cap rose US$15m last week; retail investors who hold 42% profited and so did insiders

Key Insights

• The considerable ownership by retail investors in Redwoods Acquisition indicates that they collectively have a greater say in management and business strategy
• The top 7 shareholders own 51% of the company
• Insider ownership in Redwoods Acquisition is 37%

To get a sense of who is truly in control of Redwoods Acquisition Corp. (NASDAQ:RWOD), it is important to understand the ownership structure of the business. We can see that retail investors own the lion's share in the company with 42% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Following a 16% increase in the stock price last week, retail investors profited the most, but insiders who own 37% stock also stood to gain from the increase.

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

View our latest analysis for Redwoods Acquisition

What Does The Institutional Ownership Tell Us About Redwoods Acquisition?

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 Redwoods Acquisition does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Redwoods Acquisition, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Redwoods Acquisition. Gan Min is currently the company's largest shareholder with 35% of shares outstanding. With 4.8% and 2.8% of the shares outstanding respectively, Meteora Capital, LLC and Westchester Capital Management, LLC are the second and third largest shareholders. In addition, we found that Jiande Chen, the CEO has 0.5% of the shares allocated to their name.

We did some more digging and found that 7 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Redwoods Acquisition

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

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.

It seems insiders own a significant proportion of Redwoods Acquisition Corp.. Insiders own US$40m worth of shares in the US$106m company. 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 42% stake in Redwoods Acquisition. 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Redwoods Acquisition , and understanding them should be part of your investment process.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.