Key Insights

• Significantly high institutional ownership implies Honest Company's stock price is sensitive to their trading actions
• 47% of the business is held by the top 25 shareholders
• Insiders have sold recently

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. We can see that institutions own the lion's share in the company with 44% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Institutional investors endured the highest losses after the company's market cap fell by US$117m last week. However, the 151% one-year return to shareholders might have softened the blow. They should, however, be mindful of further losses in the future.

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

What Does The Institutional Ownership Tell Us About Honest Company?

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 Honest Company does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 7.6% 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. Looking at our data, we can see that the largest shareholder is Portolan Capital Management, LLC with 7.6% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 5.6% of common stock, and Jessica Warren holds about 5.3% of the company stock. Jessica Warren, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors. In addition, we found that Carla Vernon, the CEO has 0.5% of the shares allocated to their name.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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 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.

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 Honest Company, Inc.. It has a market capitalization of just US$702m, and insiders have US$68m 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

The general public, who are usually individual investors, hold a 38% stake in Honest Company. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Honest Company better, we need to consider many other factors. For example, we've discovered 3 warning signs for Honest Company that you should be aware of before investing here.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.