Stock Analysis

Redfin Corporation (NASDAQ:RDFN) institutional owners may be pleased with recent gains after 57% loss over the past year

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Key Insights

  • Institutions' substantial holdings in Redfin implies that they have significant influence over the company's share price
  • The top 5 shareholders own 50% of the company
  • Insiders have been buying lately

A look at the shareholders of Redfin Corporation (NASDAQ:RDFN) can tell us which group is most powerful. The group holding the most number of shares in the company, around 82% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Last week's US$222m market cap gain would probably be appreciated by institutional investors, especially after a year of 57% losses.

In the chart below, we zoom in on the different ownership groups of Redfin.

See our latest analysis for Redfin

NasdaqGS:RDFN Ownership Breakdown March 17th 2023

What Does The Institutional Ownership Tell Us About Redfin?

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.

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

NasdaqGS:RDFN Earnings and Revenue Growth March 17th 2023

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in Redfin. Bares Capital Management, Inc. is currently the company's largest shareholder with 18% of shares outstanding. In comparison, the second and third largest shareholders hold about 13% and 8.9% of the stock. Additionally, the company's CEO Glenn Kelman directly holds 1.1% 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.

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

Insider Ownership Of Redfin

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.

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 Redfin Corporation. It has a market capitalization of just US$959m, and insiders have US$35m worth of shares, in their own names. 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 15% stake in Redfin. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Redfin better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Redfin , and understanding them should be part of your investment process.

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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