Is Luna Innovations Incorporated's (NASDAQ:LUNA) Shareholder Ownership Skewed Towards Insiders?

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 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.

Luna Innovations is not a large company by global standards. It has a market capitalization of US$338m, 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 own shares in the company. 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

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.

As you can see, institutional investors have a fair amount of stake in Luna Innovations. 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. 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 Luna Innovations' 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. Luna Innovations is not owned by hedge funds. BlackRock, Inc. is currently the largest shareholder, with 6.4% of shares outstanding. Royce & Associates, LP is the second largest shareholder owning 6.2% of common stock, and AMH Equity, Ltd. holds about 4.8% of the company stock. In addition, we found that Scott Graeff, the CEO has 1.7% of the shares allocated to their name.

After doing some more digging, we found that the top 20 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Luna Innovations

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 Luna Innovations Incorporated. In their own names, insiders own US$23m worth of stock in the US$338m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, with a 40% stake in the company, will not easily be ignored. 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. Take risks for example - Luna Innovations has 2 warning signs we think you should be aware of.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

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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