Scilex Holding Company's (NASDAQ:SCLX) last week's 47% decline must have disappointed retail investors who have a significant stake
Key Insights
Scilex Holding's significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
A total of 25 investors have a majority stake in the company with 47% ownership
Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock
A look at the shareholders of Scilex Holding Company (NASDAQ:SCLX) can tell us which group is most powerful. We can see that retail investors own the lion's share in the company with 53% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
And last week, retail investors endured the biggest losses as the stock fell by 47%.
Let's take a closer look to see what the different types of shareholders can tell us about Scilex Holding.
Check out our latest analysis for Scilex Holding
What Does The Institutional Ownership Tell Us About Scilex Holding?
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.
As you can see, institutional investors have a fair amount of stake in Scilex Holding. 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 Scilex Holding's historic earnings and revenue below, but keep in mind there's always more to the story.
Scilex Holding is not owned by hedge funds. The company's largest shareholder is Sorrento Therapeutics, Inc., with ownership of 41%. For context, the second largest shareholder holds about 4.1% of the shares outstanding, followed by an ownership of 0.4% 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 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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.
Insider Ownership Of Scilex Holding
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.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our data suggests that insiders own under 1% of Scilex Holding Company in their own names. Keep in mind that it's a big company, and the insiders own US$5.8m worth of shares. The absolute value might be more important than the proportional share. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.
General Public Ownership
The general public, mostly comprising of individual investors, collectively holds 53% of Scilex Holding shares. 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.
Public Company Ownership
We can see that public companies hold 41% of the Scilex Holding shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.
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 for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Scilex Holding , and understanding them should be part of your investment process.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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