TrueCar, Inc.'s (NASDAQ:TRUE) recent 18% pullback adds to one-year year losses, institutional owners may take drastic measures

Key Insights

• Significantly high institutional ownership implies TrueCar's stock price is sensitive to their trading actions
• The top 6 shareholders own 54% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

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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 72% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutional investors saw their holdings value drop by 18% last week. The recent loss, which adds to a one-year loss of 54% for stockholders, may not sit well with this group of investors. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the downtrend continues, institutions may face pressures to sell TrueCar, which might have negative implications on individual investors.

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

See our latest analysis for TrueCar

What Does The Institutional Ownership Tell Us About TrueCar?

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 TrueCar does have institutional investors; and they hold a good portion of the company's stock. 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. 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 TrueCar's historic earnings and revenue below, but keep in mind there's always more to the story.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Our data indicates that hedge funds own 6.8% 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. USAA Investment Services Company is the second largest shareholder owning 9.1% of common stock, and BlackRock, Inc. holds about 8.6% of the company stock. In addition, we found that Jantoon Reigersman, the CEO has 0.8% of the shares allocated to their name.

On further inspection, we found that more than half the company's shares are owned by the top 6 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 TrueCar

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.

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.

Shareholders would probably be interested to learn that insiders own shares in TrueCar, Inc.. As individuals, the insiders collectively own US$3.7m worth of the US$113m company. It is good to see some investment by insiders, but we usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.

General Public Ownership

With a 18% ownership, the general public, mostly comprising of individual investors, have some degree of sway over TrueCar. 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. For instance, we've identified 1 warning sign for TrueCar that you should be aware of.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.