Is Educational Development Corporation's (NASDAQ:EDUC) Shareholder Ownership Skewed Towards Insiders?

A look at the shareholders of Educational Development Corporation (NASDAQ:EDUC) can tell us which group is most powerful. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.

Educational Development is a smaller company with a market capitalization of US$132m, so it may still be flying under the radar of many institutional investors. In the chart below, we can see that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about Educational Development.

Check out our latest analysis for Educational Development

What Does The Institutional Ownership Tell Us About Educational Development?

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.

Educational Development 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. 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 Educational Development, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Educational Development. The company's CEO Randall White is the largest shareholder with 17% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.3% and 5.1%, of the shares outstanding, respectively. Interestingly, the second-largest shareholder, Craig White is also Chief Operating Officer, again, pointing towards strong insider ownership amongst the company's top shareholders.

After doing some more digging, we found that the top 24 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Educational Development

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.

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.

Our most recent data indicates that insiders own a reasonable proportion of Educational Development Corporation. Insiders own US$32m worth of shares in the US$132m company. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

With a 49% ownership, the general public have some degree of sway over Educational Development. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Educational Development better, we need to consider many other factors. For instance, we've identified 1 warning sign for Educational Development that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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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