Private equity firms invested in Sprinklr, Inc. (NYSE:CXM) copped the brunt of last week's US$245m market cap decline
Key Insights
Significant control over Sprinklr by private equity firms implies that the general public has more power to influence management and governance-related decisions
60% of the business is held by the top 3 shareholders
To get a sense of who is truly in control of Sprinklr, Inc. (NYSE:CXM), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are private equity firms with 40% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
While the holdings of private equity firms took a hit after last week’s 7.6% price drop, insiders with their 24% also suffered.
Let's delve deeper into each type of owner of Sprinklr, beginning with the chart below.
See our latest analysis for Sprinklr
What Does The Institutional Ownership Tell Us About Sprinklr?
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.
Sprinklr already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Sprinklr'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 Sprinklr. Hellman & Friedman LLC is currently the company's largest shareholder with 25% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 20% and 15%, of the shares outstanding, respectively. Ragy Thomas, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.
A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 60% stake.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Sprinklr
The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 information suggests that insiders maintain a significant holding in Sprinklr, Inc.. Insiders own US$703m worth of shares in the US$3.0b company. That's quite meaningful. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public-- including retail investors -- own 13% stake in the company, and hence can't easily be ignored. 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 a stake of 40%, private equity firms could influence the Sprinklr board. 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. Be aware that Sprinklr is showing 2 warning signs in our investment analysis , you should know about...
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.
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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