Individual investors who hold 53% of Red Cat Holdings, Inc. (NASDAQ:RCAT) gained 12%, institutions profited as well

Key Insights

• The considerable ownership by individual investors in Red Cat Holdings indicates that they collectively have a greater say in management and business strategy
• 45% of the business is held by the top 25 shareholders
• 15% of Red Cat Holdings is held by insiders

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If you want to know who really controls Red Cat Holdings, Inc. (NASDAQ:RCAT), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 53% to be precise, is individual investors. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Following a 12% increase in the stock price last week, individual investors profited the most, but institutions who own 32% stock also stood to gain from the increase.

Let's delve deeper into each type of owner of Red Cat Holdings, beginning with the chart below.

View our latest analysis for Red Cat Holdings

What Does The Institutional Ownership Tell Us About Red Cat Holdings?

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 Red Cat Holdings 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. 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 Red Cat Holdings' historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Red Cat Holdings. The company's CEO Jeffrey Thompson is the largest shareholder with 14% of shares outstanding. In comparison, the second and third largest shareholders hold about 14% and 2.8% of the stock.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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 Red Cat Holdings

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

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own a reasonable proportion of Red Cat Holdings, Inc.. Insiders have a US$72m stake in this US$487m business. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, mostly comprising of individual investors, collectively holds 53% of Red Cat Holdings shares. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Red Cat Holdings better, we need to consider many other factors. For instance, we've identified 2 warning signs for Red Cat Holdings that 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. 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.