Stock Analysis

What Kind Of Shareholders Hold The Majority In Smart Sand, Inc.'s (NASDAQ:SND) Shares?

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NasdaqGS:SND
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A look at the shareholders of Smart Sand, Inc. (NASDAQ:SND) can tell us which group is most powerful. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. 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.

Smart Sand is not a large company by global standards. It has a market capitalization of US$131m, which means it wouldn't have the attention of many institutional investors. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. Let's delve deeper into each type of owner, to discover more about Smart Sand.

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ownership-breakdown
NasdaqGS:SND Ownership Breakdown February 22nd 2021

What Does The Institutional Ownership Tell Us About Smart Sand?

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.

Smart Sand already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Smart Sand, (below). Of course, keep in mind that there are other factors to consider, too.

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NasdaqGS:SND Earnings and Revenue Growth February 22nd 2021

We note that hedge funds don't have a meaningful investment in Smart Sand. Clearlake Capital Group, L.P. is currently the company's largest shareholder with 25% of shares outstanding. For context, the second largest shareholder holds about 13% of the shares outstanding, followed by an ownership of 3.7% by the third-largest shareholder. Furthermore, CEO Charles Young is the owner of 1.8% of the company's shares.

We also observed that the top 7 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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 Smart Sand

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

I can report that insiders do own shares in Smart Sand, Inc.. In their own names, insiders own US$11m worth of stock in the US$131m company. Some would say this shows alignment of interests between shareholders and the board, though I generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public holds a 35% stake in Smart Sand. 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 25%, private equity firms could influence the Smart Sand 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 13%, 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.

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 - Smart Sand has 5 warning signs (and 1 which is concerning) we think you should know about.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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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