IO Biotech, Inc.'s (NASDAQ:IOBT) largest shareholders are private equity firms who were rewarded as market cap surged US$16m last week

Key Insights

• IO Biotech's significant private equity firms ownership suggests that the key decisions are influenced by shareholders from the larger public
• 52% of the business is held by the top 5 shareholders
• Recent purchases by insiders

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A look at the shareholders of IO Biotech, Inc. (NASDAQ:IOBT) can tell us which group is most powerful. We can see that private equity firms own the lion's share in the company with 52% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Clearly, private equity firms benefitted the most after the company's market cap rose by US$16m last week.

Let's delve deeper into each type of owner of IO Biotech, beginning with the chart below.

See our latest analysis for IO Biotech

What Does The Institutional Ownership Tell Us About IO Biotech?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

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

We note that hedge funds don't have a meaningful investment in IO Biotech. Lundbeckfonden BioCapital is currently the largest shareholder, with 21% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 10% and 9.4%, of the shares outstanding, respectively.

To make our study more interesting, we found that the top 5 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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. 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 IO Biotech

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 IO Biotech, Inc. insiders own under 1% of the company. It seems the board members have no more than US$401k worth of shares in the US$112m company. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 33% stake in IO Biotech. 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

Private equity firms hold a 52% stake in IO Biotech. This suggests they can be influential in key policy decisions. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand IO Biotech better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with IO Biotech (at least 2 which are potentially serious) , and understanding them should be part of your investment process.

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.