After losing 13% in the past year, Tesla, Inc. (NASDAQ:TSLA) institutional owners must be relieved by the recent gain
Key Insights
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Given the large stake in the stock by institutions, Tesla’s stock price might be vulnerable to their trading decisions
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44% of the business is held by the top 25 shareholders
A look at the shareholders of Tesla, Inc. (NASDAQ:TSLA) can tell us which group is most powerful. With 46% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
Institutional investors would probably welcome last week’s 6.5% increase in the share price after a year of 13% losses as a sign that returns may to begin trending higher.
Let’s take a closer look to see what the different types of shareholders can tell us about Tesla.
See our latest analysis for Tesla
What Does The Institutional Ownership Tell Us About Tesla?
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 Tesla 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. 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 Tesla’s historic earnings and revenue below, but keep in mind there’s always more to the story.
Hedge funds don’t have many shares in Tesla. With a 13% stake, CEO Elon Musk is the largest shareholder. For context, the second largest shareholder holds about 7.4% of the shares outstanding, followed by an ownership of 6.0% by the third-largest shareholder.
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 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 Tesla
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. 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.
It seems insiders own a significant proportion of Tesla, Inc.. It is very interesting to see that insiders have a meaningful US$95b stake in this US$736b business. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.
General Public Ownership
With a 41% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Tesla. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
Next Steps:
It’s always worth thinking about the different groups who own shares in a company. But to understand Tesla better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we’ve spotted 1 warning sign for Tesla you should know about.
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.