Key Insights
-
Honest Company’s significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
-
The top 11 shareholders own 50% of the company
If you want to know who really controls The Honest Company, Inc. (NASDAQ:HNST), then you’ll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are retail investors with 41% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Private equity firms, on the other hand, account for 23% of the company’s stockholders.
Let’s take a closer look to see what the different types of shareholders can tell us about Honest Company.
Check out our latest analysis for Honest Company
What Does The Institutional Ownership Tell Us About Honest Company?
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.
As you can see, institutional investors have a fair amount of stake in Honest 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 Honest Company, (below). Of course, keep in mind that there are other factors to consider, too.
Our data indicates that hedge funds own 7.4% of Honest Company. That’s interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. L Catterton Partners is currently the company’s largest shareholder with 13% of shares outstanding. Institutional Venture Partners is the second largest shareholder owning 9.9% of common stock, and Portolan Capital Management, LLC holds about 7.4% of the company stock.
After doing some more digging, we found that the top 11 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.
Researching institutional ownership is a good way to gauge and filter a stock’s expected performance. The same can be achieved by studying analyst sentiments. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Honest Company
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.
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 report that insiders do own shares in The Honest Company, Inc.. It has a market capitalization of just US$278m, and insiders have US$20m 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 41% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Honest Company. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Equity Ownership
Private equity firms hold a 23% stake in Honest Company. This suggests they can be influential in key policy decisions. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company 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. For example, we’ve discovered 4 warning signs for Honest Company that you should be aware of before investing here.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.