Great week for The RealReal, Inc. (NASDAQ:REAL) institutional investors after losing 90% over the previous year

Key Insights

• Significantly high institutional ownership implies RealReal's stock prices are sensitive to their trading actions.
• The top 14 shareholders own 50% of the company
• Insiders have been selling lately

A look at the shareholders of The RealReal, Inc. (NASDAQ:REAL) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 69% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Last week's US$15m market cap gain would probably be appreciated by institutional investors, especially after a year of 90% losses.

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

See our latest analysis for RealReal

What Does The Institutional Ownership Tell Us About RealReal?

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

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. RealReal is not owned by hedge funds. GreyLion Capital LP is currently the largest shareholder, with 7.6% of shares outstanding. With 7.0% and 5.8% of the shares outstanding respectively, BlackRock, Inc. and The Vanguard Group, Inc. are the second and third largest shareholders.

A closer look at our ownership figures suggests that the top 14 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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 RealReal

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 some shares in The RealReal, Inc.. In their own names, insiders own US$4.9m worth of stock in the US$123m 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

The general public, who are usually individual investors, hold a 20% stake in RealReal. 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.

Private Equity Ownership

With a stake of 7.6%, private equity firms could influence the RealReal board. 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 4 warning signs for RealReal you should be aware of, and 2 of them make us uncomfortable.

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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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.