Key Insights

• Significantly high institutional ownership implies Root's stock price is sensitive to their trading actions
• A total of 11 investors have a majority stake in the company with 52% ownership
• Recent sales by insiders

To get a sense of who is truly in control of Root, Inc. (NASDAQ:ROOT), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 39% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors was the group most impacted after the company's market cap fell to US$1.1b last week. However, the 570% one-year return to shareholders may have helped lessen their pain. They should, however, be mindful of further losses in the future.

Let's take a closer look to see what the different types of shareholders can tell us about Root.

What Does The Institutional Ownership Tell Us About Root?

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.

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

Hedge funds don't have many shares in Root. Ribbit Management Company, LLC is currently the company's largest shareholder with 9.7% of shares outstanding. With 9.6% and 7.4% of the shares outstanding respectively, Christopher Olsen and Alexander Timm are the second and third largest shareholders. Alexander Timm, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.

A closer look at our ownership figures suggests that the top 11 shareholders have a combined ownership of 52% implying that no single shareholder has a majority.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. 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 Root

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.

Our most recent data indicates that insiders own a reasonable proportion of Root, Inc.. It is very interesting to see that insiders have a meaningful US$228m stake in this US$1.1b 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

The general public-- including retail investors -- own 25% stake in the company, and hence can't easily be ignored. 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

With an ownership of 15%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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 3 warning signs for Root (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.