Neuronetics, Inc.'s (NASDAQ:STIM) market cap surged US$39m last week, individual investors who have a lot riding on the company were rewarded

Key Insights

• The considerable ownership by individual investors in Neuronetics indicates that they collectively have a greater say in management and business strategy
• The top 9 shareholders own 51% of the company
• Insiders have been selling lately

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Every investor in Neuronetics, Inc. (NASDAQ:STIM) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are individual investors with 44% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Clearly, individual investors benefitted the most after the company's market cap rose by US$39m last week.

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

See our latest analysis for Neuronetics

What Does The Institutional Ownership Tell Us About Neuronetics?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Neuronetics already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Neuronetics' earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in Neuronetics. The company's largest shareholder is Madryn Asset Management, LP, with ownership of 37%. In comparison, the second and third largest shareholders hold about 3.0% and 2.3% of the stock. Furthermore, CEO Keith Sullivan is the owner of 1.4% of the company's shares.

We also observed that the top 9 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Neuronetics

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.

We can see that insiders own shares in Neuronetics, Inc.. As individuals, the insiders collectively own US$20m worth of the US$295m company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 44% stake in the company, and hence can't 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 Equity Ownership

With a stake of 37%, private equity firms could influence the Neuronetics board. 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. For example, we've discovered 4 warning signs for Neuronetics (2 shouldn't be ignored!) that you should be aware of before investing here.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.