Yahoo Finance With 54% ownership, SoundThinking, Inc. (NASDAQ:SSTI) boasts of strong institutional backing
Key Insights
Institutions' substantial holdings in SoundThinking implies that they have significant influence over the company's share price
The top 7 shareholders own 51% of the company
A look at the shareholders of SoundThinking, Inc. (NASDAQ:SSTI) can tell us which group is most powerful. The group holding the most number of shares in the company, around 54% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).
Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.
In the chart below, we zoom in on the different ownership groups of SoundThinking.
Check out our latest analysis for SoundThinking
What Does The Institutional Ownership Tell Us About SoundThinking?
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.
SoundThinking already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 SoundThinking's historic earnings and revenue below, but keep in mind there's always more to the story.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. It looks like hedge funds own 7.3% of SoundThinking 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. Looking at our data, we can see that the largest shareholder is Federated Hermes, Inc. with 10% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 8.9% and 8.7%, of the shares outstanding, respectively. Additionally, the company's CEO Ralph Clark directly holds 3.6% of the total shares outstanding.
We did some more digging and found that 7 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.
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. 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 SoundThinking
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
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.
It seems insiders own a significant proportion of SoundThinking, Inc.. Insiders own US$26m worth of shares in the US$175m company. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public, who are usually individual investors, hold a 15% stake in SoundThinking. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
Private Equity Ownership
With a stake of 8.9%, private equity firms could influence the SoundThinking 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:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for SoundThinking you should know about.
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.
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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.
