Stock Analysis

What Percentage Of Root, Inc. (NASDAQ:ROOT) Shares Do Insiders Own?

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NasdaqGS:ROOT
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Every investor in Root, Inc. (NASDAQ:ROOT) should be aware of the most powerful shareholder groups. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.

Root has a market capitalization of US$5.5b, so it's too big to fly under the radar. We'd expect to see both institutions and retail investors owning a portion of the company. Taking a look at our data on the ownership groups (below), it seems that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about Root.

Check out our latest analysis for Root

ownership-breakdown
NasdaqGS:ROOT Ownership Breakdown January 29th 2021

What Does The Institutional Ownership Tell Us About Root?

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 Root. 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. 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 Root's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NasdaqGS:ROOT Earnings and Revenue Growth January 29th 2021

Our data indicates that hedge funds own 8.4% of Root. 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 Christopher Olsen with 20% of shares outstanding. Ribbit Capital is the second largest shareholder owning 12% of common stock, and Tiger Global Management LLC holds about 8.4% of the company stock. Additionally, the company's CEO Alexander Timm directly holds 7.7% of the total shares outstanding.

Our research also brought to light the fact that roughly 56% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Root

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 Root, Inc.. It is very interesting to see that insiders have a meaningful US$1.9b stake in this US$5.5b business. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

The general public, with a 18% stake in the company, will not easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

Private equity firms hold a 26% stake in Root. This suggests they can be influential in key policy decisions. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Root better, we need to consider many other factors. Be aware that Root is showing 4 warning signs in our investment analysis , and 2 of those are a bit unpleasant...

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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