DermTech, Inc. (NASDAQ:DMTK) surges 21%; retail investors who own 59% shares profited along with institutions
Key Insights
The considerable ownership by retail investors in DermTech indicates that they collectively have a greater say in management and business strategy
A total of 25 investors have a majority stake in the company with 36% ownership
Every investor in DermTech, Inc. (NASDAQ:DMTK) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 59% to be precise, is retail investors. Put another way, the group faces the maximum upside potential (or downside risk).
Retail investors gained the most after market cap touched US$107m last week, while institutions who own 23% also benefitted.
In the chart below, we zoom in on the different ownership groups of DermTech.
Check out our latest analysis for DermTech
What Does The Institutional Ownership Tell Us About DermTech?
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.
We can see that DermTech 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. 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 DermTech, (below). Of course, keep in mind that there are other factors to consider, too.
It looks like hedge funds own 8.7% of DermTech shares. 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. RTW Investments, LP is currently the largest shareholder, with 8.7% of shares outstanding. For context, the second largest shareholder holds about 5.0% of the shares outstanding, followed by an ownership of 3.9% by the third-largest shareholder.
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 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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of DermTech
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 DermTech, Inc.. As individuals, the insiders collectively own US$4.3m worth of the US$107m company. It is good to see some investment by insiders, but we usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.
General Public Ownership
The general public -- including retail investors -- own 59% of DermTech. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.
Private Equity Ownership
Private equity firms hold a 5.0% stake in DermTech. This suggests they can be influential in key policy decisions. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that DermTech is showing 5 warning signs in our investment analysis , and 2 of those can't be ignored...
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.
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