Institutional investors in The Honest Company, Inc. (NASDAQ:HNST) see US$54m decrease in market cap last week, although long-term gains have benefitted them.

Key Insights

• Given the large stake in the stock by institutions, Honest Company's stock price might be vulnerable to their trading decisions
• 50% of the business is held by the top 20 shareholders
• Recent sales by insiders

If you want to know who really controls The Honest Company, Inc. (NASDAQ:HNST), 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 46% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Institutional investors endured the highest losses after the company's market cap fell by US$54m last week. However, the 83% one-year returns may have helped alleviate their overall losses. We would assume however, that they would be on the lookout for weakness in the future.

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

View our latest analysis for Honest Company

What Does The Institutional Ownership Tell Us About Honest Company?

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.

As you can see, institutional investors have a fair amount of stake in Honest Company. 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. 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 Honest Company's earnings history below. Of course, the future is what really matters.

It looks like hedge funds own 13% of Honest Company shares. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Looking at our data, we can see that the largest shareholder is Portolan Capital Management, LLC with 7.6% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 5.6% of common stock, and Divisadero Street Capital Management, LP holds about 5.5% of the company stock. In addition, we found that Carla Vernon, the CEO has 0.5% of the shares allocated to their name.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 20 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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. 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 Honest Company

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own some shares in The Honest Company, Inc.. As individuals, the insiders collectively own US$62m worth of the US$633m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 31% stake in Honest Company. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Honest Company has 2 warning signs we think you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.