Skye Bioscience's significant private equity firms ownership suggests that the key decisions are influenced by shareholders from the larger public
55% of the business is held by the top 4 shareholders
Using data from company's past performance alongside ownership research, one can better assess the future performance of a company
To get a sense of who is truly in control of Skye Bioscience, Inc. (NASDAQ:SKYE), it is important to understand the ownership structure of the business. With 43% stake, private equity firms possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
And last week, private equity firms endured the biggest losses as the stock fell by 13%.
In the chart below, we zoom in on the different ownership groups of Skye Bioscience.
What Does The Institutional Ownership Tell Us About Skye Bioscience?
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.
Skye Bioscience already has institutions on the share registry. Indeed, they own a respectable stake in 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 Skye Bioscience's historic earnings and revenue below, but keep in mind there's always more to the story.
earnings-and-revenue-growth
It looks like hedge funds own 12% of Skye Bioscience 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. 5AM Venture Management, LLC is currently the company's largest shareholder with 36% of shares outstanding. Versant Venture Management, LLC is the second largest shareholder owning 7.2% of common stock, and Altium Capital Management LP holds about 6.4% of the company stock.
Our research also brought to light the fact that roughly 55% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.
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. There is some analyst coverage of the stock, but it could still become more well known, with time.
Insider Ownership Of Skye Bioscience
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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.
Our information suggests that Skye Bioscience, Inc. insiders own under 1% of the company. However, it's possible that insiders might have an indirect interest through a more complex structure. It appears that the board holds about US$385k worth of stock. This compares to a market capitalization of US$318m. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.
General Public Ownership
With a 37% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Skye Bioscience. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Equity Ownership
With an ownership of 43%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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
Our data indicates that Private Companies hold 3.1%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.
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. For instance, we've identified 5 warning signs for Skye Bioscience (4 can't be ignored) that you should be aware of.
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.
