Key Insights

• Given the large stake in the stock by institutions, RealReal's stock price might be vulnerable to their trading decisions
• 50% of the business is held by the top 11 shareholders
• Insiders have been selling lately

A look at the shareholders of The RealReal, Inc. (NASDAQ:REAL) can tell us which group is most powerful. The group holding the most number of shares in the company, around 68% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And last week, institutional investors ended up benefitting the most after the company hit US$1.2b in market cap. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 440%.

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

What Does The Institutional Ownership Tell Us About RealReal?

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

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in RealReal. Looking at our data, we can see that the largest shareholder is GreyLion Partners LP with 6.8% of shares outstanding. The second and third largest shareholders are Kanen Wealth Management LLC and BlackRock, Inc., with an equal amount of shares to their name at 6.6%. In addition, we found that Rati Levesque, the CEO has 0.5% of the shares allocated to their name.

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.

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 are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

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.

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.

We can see that insiders own shares in The RealReal, Inc.. The insiders have a meaningful stake worth US$116m. Most would see this as a real positive. Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 16% stake in RealReal. 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 6.8% stake in RealReal. This suggests they can be influential in key policy decisions. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with RealReal (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

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.