P3 Health Partners Inc.'s (NASDAQ:PIII) market cap dropped US$19m last week; Private equity firms bore the brunt

Key Insights

• Significant control over P3 Health Partners by private equity firms implies that the general public has more power to influence management and governance-related decisions
• 53% of the business is held by the top 2 shareholders
• Institutional ownership in P3 Health Partners is 14%

If you want to know who really controls P3 Health Partners Inc. (NASDAQ:PIII), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 49% to be precise, is private equity firms. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And last week, private equity firms endured the biggest losses as the stock fell by 32%.

Let's delve deeper into each type of owner of P3 Health Partners, beginning with the chart below.

View our latest analysis for P3 Health Partners

What Does The Institutional Ownership Tell Us About P3 Health Partners?

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.

P3 Health Partners 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. 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 P3 Health Partners' historic earnings and revenue below, but keep in mind there's always more to the story.

It would appear that 9.9% of P3 Health Partners shares are controlled by hedge funds. 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. The company's largest shareholder is Chicago Pacific Founders, with ownership of 43%. For context, the second largest shareholder holds about 9.9% of the shares outstanding, followed by an ownership of 5.5% by the third-largest shareholder.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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 P3 Health Partners

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.

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.

Shareholders would probably be interested to learn that insiders own shares in P3 Health Partners Inc.. In their own names, insiders own US$4.5m worth of stock in the US$140m company. Some would say this shows alignment of interests between shareholders and the board, though we 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-- including retail investors -- own 24% stake in the company, and hence can't easily be ignored. 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 49%, 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.

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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for P3 Health Partners (of which 2 make us uncomfortable!) 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.