Institutional investors control 51% of Root, Inc. (NASDAQ:ROOT) and were rewarded last week after stock increased 12%

Key Insights

• Institutions' substantial holdings in Root implies that they have significant influence over the company's share price
• 50% of the business is held by the top 17 shareholders
• Insiders have sold recently

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

If you want to know who really controls Root, Inc. (NASDAQ:ROOT), 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 51% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Last week’s 12% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. The one-year return on investment is currently 253% and last week's gain would have been more than welcomed.

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

See our latest analysis for Root

What Does The Institutional Ownership Tell Us About Root?

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.

Root already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Root'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. Root is not owned by hedge funds. Ribbit Management Company, LLC is currently the largest shareholder, with 8.0% of shares outstanding. Alexander Timm is the second largest shareholder owning 7.5% of common stock, and T. Rowe Price Group, Inc. holds about 4.5% of the company stock. Alexander Timm, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

After doing some more digging, we found that the top 17 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Root

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. 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.

It seems insiders own a significant proportion of Root, Inc.. It has a market capitalization of just US$2.4b, and insiders have US$253m worth of shares in their own names. That's quite significant. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 31% stake in Root. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Equity Ownership

With a stake of 8.0%, private equity firms could influence the Root board. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

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. Take risks for example - Root 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.