Is Vuzix Corporation's (NASDAQ:VUZI) Shareholder Ownership Skewed Towards Insiders?

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Simply Wall St

Mon, Jul 4, 2022, 5:37 AM 4 min read

If you want to know who really controls Vuzix Corporation (NASDAQ:VUZI), then you'll have to look at the makeup of its share registry. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.

Vuzix is not a large company by global standards. It has a market capitalization of US$427m, which means it wouldn't have the attention of many institutional investors. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about Vuzix.

View our latest analysis for Vuzix

ownership-breakdown — NasdaqCM:VUZI Ownership Breakdown July 4th 2022

What Does The Institutional Ownership Tell Us About Vuzix?

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 Vuzix 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 Vuzix's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth — NasdaqCM:VUZI Earnings and Revenue Growth July 4th 2022

We note that hedge funds don't have a meaningful investment in Vuzix. ARK Investment Management LLC is currently the largest shareholder, with 11% of shares outstanding. In comparison, the second and third largest shareholders hold about 6.7% and 4.9% of the stock. Additionally, the company's CEO Paul Travers directly holds 4.4% of the total shares outstanding.

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 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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Vuzix

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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.

We can report that insiders do own shares in Vuzix Corporation. As individuals, the insiders collectively own US$31m worth of the US$427m company. 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-- including retail investors -- own 49% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Vuzix has 2 warning signs we think you should be aware of.

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.