Key Insights

• Significantly high institutional ownership implies Honest Company's stock price is sensitive to their trading actions
• The top 25 shareholders own 47% of the company
• Insiders have been selling lately

Every investor in The Honest Company, Inc. (NASDAQ:HNST) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions 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).

Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.

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

Check out our latest analysis for Honest Company

What Does The Institutional Ownership Tell Us About Honest Company?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors have a fair amount of stake in Honest 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 Honest Company, (below). Of course, keep in mind that there are other factors to consider, too.

It would appear that 7.6% of Honest Company 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. Our data shows that Portolan Capital Management, LLC is the largest shareholder with 7.6% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.6% and 5.3% of the stock. Jessica Warren, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors. Additionally, the company's CEO Carla Vernon directly holds 0.5% of the total shares outstanding.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where 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 Honest Company

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 The Honest Company, Inc.. It has a market capitalization of just US$622m, and insiders have US$61m worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 38% stake in the company, and hence can't easily be ignored. 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 Honest Company better, we need to consider many other factors. For example, we've discovered 2 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.