Do Insiders Own Lots Of Shares In Luna Innovations Incorporated (NASDAQ:LUNA)?

By
Simply Wall St
Published
December 19, 2020

A look at the shareholders of Luna Innovations Incorporated (NASDAQ:LUNA) can tell us which group is most powerful. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.

Luna Innovations is not a large company by global standards. It has a market capitalization of US$297m, which means it wouldn't have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutions are noticeable on the share registry. Let's take a closer look to see what the different types of shareholders can tell us about Luna Innovations.

See our latest analysis for Luna Innovations

NasdaqCM:LUNA Ownership Breakdown December 19th 2020

What Does The Institutional Ownership Tell Us About Luna Innovations?

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.

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

NasdaqCM:LUNA Earnings and Revenue Growth December 19th 2020

We note that hedge funds don't have a meaningful investment in Luna Innovations. Royce & Associates, LP is currently the company's largest shareholder with 6.4% of shares outstanding. For context, the second largest shareholder holds about 6.3% of the shares outstanding, followed by an ownership of 4.8% by the third-largest shareholder. Additionally, the company's CEO Scott Graeff directly holds 1.6% of the total shares outstanding.

After doing some more digging, we found that the top 23 have the combined ownership of 51% 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. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Luna Innovations

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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.

Shareholders would probably be interested to learn that insiders own shares in Luna Innovations Incorporated. It has a market capitalization of just US$297m, and insiders have US$21m 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

With a 42% ownership, the general public have some degree of sway over Luna Innovations. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Luna Innovations 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. 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.
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