Institutional investors control 51% of TrueCar, Inc. (NASDAQ:TRUE) and were rewarded last week after stock increased 13%

Key Insights

• Institutions' substantial holdings in TrueCar implies that they have significant influence over the company's share price
• 52% of the business is held by the top 5 shareholders
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

If you want to know who really controls TrueCar, Inc. (NASDAQ:TRUE), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 51% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And things are looking up for institutional investors after the company gained US$32m in market cap last week. One-year return to shareholders is currently 38% and last week’s gain was the icing on the cake.

Let's take a closer look to see what the different types of shareholders can tell us about TrueCar.

View our latest analysis for TrueCar

What Does The Institutional Ownership Tell Us About TrueCar?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

We can see that TrueCar 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 TrueCar, (below). Of course, keep in mind that there are other factors to consider, too.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Our data indicates that hedge funds own 29% of TrueCar. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Caledonia (Private) Investments Pty Limited is currently the largest shareholder, with 20% of shares outstanding. With 9.3% and 8.7% of the shares outstanding respectively, Cannell Capital LLC and Victory Income Investors are the second and third largest shareholders. Additionally, the company's CEO Jantoon Reigersman directly holds 0.5% of the total shares outstanding.

To make our study more interesting, we found that the top 5 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of TrueCar

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

We can see that insiders own shares in TrueCar, Inc.. It has a market capitalization of just US$287m, and insiders have US$6.8m worth of shares, in their own names. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 12% stake in the company, and hence can't easily be ignored. 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.

Public Company Ownership

Public companies currently own 5.9% of TrueCar stock. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand TrueCar better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for TrueCar you should be aware of.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

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.

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