Great week for SoundThinking, Inc. (NASDAQ:SSTI) institutional investors after losing 30% over the previous year
Key Insights
Institutions' substantial holdings in SoundThinking implies that they have significant influence over the company's share price
The top 7 shareholders own 53% of the company
If you want to know who really controls SoundThinking, Inc. (NASDAQ:SSTI), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 54% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
After a year of 30% losses, last week’s 15% gain would be welcomed by institutional investors as a likely sign that returns might start trending higher.
In the chart below, we zoom in on the different ownership groups of SoundThinking.
See our latest analysis for SoundThinking
What Does The Institutional Ownership Tell Us About SoundThinking?
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 SoundThinking 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 SoundThinking's historic earnings and revenue below, but keep in mind there's always more to the story.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. It would appear that 8.5% of SoundThinking shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Federated Hermes, Inc. is currently the company's largest shareholder with 10% of shares outstanding. Lauder Partners, LLC is the second largest shareholder owning 8.9% of common stock, and Gary Lauder holds about 8.8% of the company stock. Furthermore, CEO Ralph Clark is the owner of 3.4% of the company's shares.
On further inspection, we found that more than half the company's shares are owned by the top 7 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
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 SoundThinking
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our most recent data indicates that insiders own a reasonable proportion of SoundThinking, Inc.. Insiders own US$53m worth of shares in the US$307m company. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public, who are usually individual investors, hold a 11% stake in SoundThinking. 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.
Private Equity Ownership
With an ownership of 8.9%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for SoundThinking you should be aware of.
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.
