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The big shareholder groups in Sorrento Therapeutics, Inc. (NASDAQ:SRNE) have power over the company. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. 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.’
With a market capitalization of US$252m, Sorrento Therapeutics is a small cap stock, so it might not be well known by many institutional investors. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. Let’s delve deeper into each type of owner, to discover more about SRNE.
What Does The Institutional Ownership Tell Us About Sorrento Therapeutics?
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.
Sorrento Therapeutics already has institutions on the share registry. Indeed, they own 29% of 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. 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 Sorrento Therapeutics’s historic earnings and revenue, below, but keep in mind there’s always more to the story.
Hedge funds don’t have many shares in Sorrento Therapeutics. 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 Sorrento Therapeutics
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 a reasonable proportion of Sorrento Therapeutics, Inc.. Insiders own US$65m worth of shares in the US$252m 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 27% ownership, the general public have some degree of sway over SRNE. 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
Private equity firms hold a 5.9% stake in SRNE. 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.
Private Company Ownership
It seems that Private Companies own 7.7%, of the SRNE stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it’s hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
Public Company Ownership
It appears to us that public companies own 3.8% of SRNE. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.
While it is well worth considering the different groups that own a company, there are other factors that are even more important.
I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.
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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.