Could The SomnoMed Limited (ASX:SOM) Ownership Structure Tell Us Something Useful?

The big shareholder groups in SomnoMed Limited (ASX:SOM) have power over the company. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.

SomnoMed is not a large company by global standards. It has a market capitalization of AU$155m, which means it wouldn't have the attention of many institutional investors. In the chart below, we can see that institutions own shares in the company. Let's take a closer look to see what the different types of shareholders can tell us about SomnoMed.

View our latest analysis for SomnoMed

What Does The Institutional Ownership Tell Us About SomnoMed?

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.

We can see that SomnoMed does have institutional investors; and they hold a good portion of the company's stock. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at SomnoMed's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in SomnoMed. TDM Growth Partners is currently the largest shareholder, with 23% of shares outstanding. In comparison, the second and third largest shareholders hold about 9.9% and 7.9% of the stock. Furthermore, CEO Neil Verdal-Austin is the owner of 1.5% of the company's shares.

Our research also brought to light the fact that roughly 54% of the company is controlled by the top 5 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 SomnoMed

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.

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.

We can see that insiders own shares in SomnoMed Limited. In their own names, insiders own AU$12m worth of stock in the AU$155m company. It is good to see some investment by insiders, but I usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.

General Public Ownership

The general public, with a 18% stake in the company, will not 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 Company Ownership

Our data indicates that Private Companies hold 21%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Public Company Ownership

We can see that public companies hold 5.8% of the SomnoMed 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:

It's always worth thinking about the different groups who own shares in a company. But to understand SomnoMed better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with SomnoMed .

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. 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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