Institutional investors may adopt severe steps after Sight Sciences, Inc.'s (NASDAQ:SGHT) latest 12% drop adds to a year losses
To get a sense of who is truly in control of Sight Sciences, Inc. (NASDAQ:SGHT), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 36% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).
And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$294m last week after a 12% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 73% might not go down well especially with this category of shareholders. Often called “market makers”, institutions wield significant power in influencing the price dynamics of any stock. As a result, if the downtrend continues, institutions may face pressures to sell Sight Sciences, which might have negative implications on individual investors.
Let's take a closer look to see what the different types of shareholders can tell us about Sight Sciences.
See our latest analysis for Sight Sciences
What Does The Institutional Ownership Tell Us About Sight Sciences?
Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.
Sight Sciences already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Sight Sciences, (below). Of course, keep in mind that there are other factors to consider, too.
It looks like hedge funds own 12% of Sight Sciences shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. D1 Capital Partners L.P. is currently the largest shareholder, with 12% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 11% and 10.0%, of the shares outstanding, respectively. Paul Badawi, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.
We also observed that the top 6 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Sight Sciences
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 Sight Sciences, Inc.. Insiders own US$50m worth of shares in the US$294m company. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.
General Public Ownership
With a 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Sight Sciences. 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 20%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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:
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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Sight Sciences you should know about.
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.
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