Key Insights

• Given the large stake in the stock by institutions, TrueCar's stock price might be vulnerable to their trading decisions
• The top 5 shareholders own 52% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

A look at the shareholders of TrueCar, Inc. (NASDAQ:TRUE) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 52% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Institutional investors was the group most impacted after the company's market cap fell to US$332m last week. However, the 9.5% one-year return to shareholders might have softened the blow. But they would probably be wary of future losses.

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

See our latest analysis for TrueCar

What Does The Institutional Ownership Tell Us About TrueCar?

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.

TrueCar already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 TrueCar, (below). Of course, keep in mind that there are other factors to consider, too.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. It would appear that 29% of TrueCar shares are controlled by hedge funds. 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. Caledonia (Private) Investments Pty Limited is currently the company's largest shareholder with 20% of shares outstanding. In comparison, the second and third largest shareholders hold about 9.2% and 8.6% of the stock. Furthermore, CEO Jantoon Reigersman is the owner of 0.7% of the company's shares.

To make our study more interesting, we found that the top 5 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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 TrueCar

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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 some shares in TrueCar, Inc.. It has a market capitalization of just US$332m, and insiders have US$9.5m worth of shares, in their own names. Some would say this shows alignment of interests between shareholders and the board. But 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 TrueCar. 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 TrueCar better, we need to consider many other factors. For instance, we've identified 1 warning sign for TrueCar that you should be aware of.

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.