Yahoo Finance Individual investors who have a significant stake must be disappointed along with institutions after SmileDirectClub, Inc.'s (NASDAQ:SDC) market cap dropped by US$14m
Every investor in SmileDirectClub, Inc. (NASDAQ:SDC) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 67% to be precise, is individual investors. Put another way, the group faces the maximum upside potential (or downside risk).
While the holdings of individual investors took a hit after last week’s 14% price drop, institutions with their 23% holdings also suffered.
Let's take a closer look to see what the different types of shareholders can tell us about SmileDirectClub.
See our latest analysis for SmileDirectClub
What Does The Institutional Ownership Tell Us About SmileDirectClub?
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 SmileDirectClub does have institutional investors; and they hold a good portion of the company's stock. 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 SmileDirectClub's historic earnings and revenue below, but keep in mind there's always more to the story.
It would appear that 5.9% of SmileDirectClub 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. Looking at our data, we can see that the largest shareholder is The Vanguard Group, Inc. with 7.4% of shares outstanding. Prentice Capital Management, LP is the second largest shareholder owning 5.9% of common stock, and BlackRock, Inc. holds about 1.2% of the company stock. Furthermore, CEO David Katzman is the owner of 0.7% of the company's shares.
Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.
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 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 SmileDirectClub
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. 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.
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.
We can see that insiders own shares in SmileDirectClub, Inc.. As individuals, the insiders collectively own US$12m worth of the US$280m company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.
General Public Ownership
The general public, mostly comprising of individual investors, collectively holds 67% of SmileDirectClub shares. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand SmileDirectClub better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 5 warning signs for SmileDirectClub (of which 3 are a bit concerning!) 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.
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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