Could The SES AI Corporation (NYSE:SES) Ownership Structure Tell Us Something Useful?

By
Simply Wall St
Published
March 16, 2022
NYSE:SES
Source: Shutterstock

Every investor in SES AI Corporation (NYSE:SES) should be aware of the most powerful shareholder groups. 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.

With a market capitalization of US$2.2b, SES AI is a decent size, so it is probably on the radar of 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 SES AI.

View our latest analysis for SES AI

ownership-breakdown
NYSE:SES Ownership Breakdown March 16th 2022

What Does The Institutional Ownership Tell Us About SES AI?

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 SES AI 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 SES AI's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NYSE:SES Earnings and Revenue Growth March 16th 2022

SES AI is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is the CEO Qichao Hu with 11% of shares outstanding. SK Inc. is the second largest shareholder owning 11% of common stock, and Temasek Holdings (Private) Limited holds about 10.0% of the company stock.

On further inspection, we found that more than half the company's shares are owned by the top 6 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 SES AI

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. 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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our information suggests that insiders maintain a significant holding in SES AI Corporation. It is very interesting to see that insiders have a meaningful US$272m stake in this US$2.2b business. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 31% ownership, the general public, mostly comprising of individual investors, have some degree of sway over SES AI. 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 a stake of 10.0%, private equity firms could influence the SES AI 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.

Private Company Ownership

We can see that Private Companies own 9.1%, of the shares on issue. 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.

Public Company Ownership

Public companies currently own 26% of SES AI stock. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - SES AI has 2 warning signs (and 1 which shouldn't be ignored) we think you should know about.

Of course this may not be the best stock to buy. So take a peek at this free 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.

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