Institutions profited after NeuroPace, Inc.'s (NASDAQ:NPCE) market cap rose US$37m last week but private equity firms profited the most

Key Insights

• NeuroPace's significant private equity firms ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 4 investors have a majority stake in the company with 52% ownership
• 31% of NeuroPace is held by Institutions

Every investor in NeuroPace, Inc. (NASDAQ:NPCE) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are private equity firms with 44% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While private equity firms were the group that benefitted the most from last week’s US$37m market cap gain, institutions too had a 31% share in those profits.

Let's take a closer look to see what the different types of shareholders can tell us about NeuroPace.

View our latest analysis for NeuroPace

What Does The Institutional Ownership Tell Us About NeuroPace?

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.

NeuroPace 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. 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 NeuroPace, (below). Of course, keep in mind that there are other factors to consider, too.

Our data indicates that hedge funds own 8.2% of NeuroPace. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. KCK Group is currently the largest shareholder, with 18% of shares outstanding. With 15% and 11% of the shares outstanding respectively, Accelmed Partners and OrbiMed Advisors LLC are the second and third largest shareholders.

To make our study more interesting, we found that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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 are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of NeuroPace

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Our most recent data indicates that insiders own some shares in NeuroPace, Inc.. It has a market capitalization of just US$356m, and insiders have US$14m worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 13% ownership, the general public, mostly comprising of individual investors, have some degree of sway over NeuroPace. 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 an ownership of 44%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

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. Be aware that NeuroPace is showing 3 warning signs in our investment analysis , you should know about...

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.