To get a sense of who is truly in control of Nkarta, Inc. (NASDAQ:NKTX), it is important to understand the ownership structure of the business. With 56% stake, private equity firms possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
While institutions, who own 31% shares weren’t spared from last week’s US$45m market cap drop, private equity firms as a group suffered the maximum losses
Let's delve deeper into each type of owner of Nkarta, beginning with the chart below.
What Does The Institutional Ownership Tell Us About Nkarta?
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.
As you can see, institutional investors have a fair amount of stake in Nkarta. 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 Nkarta, (below). Of course, keep in mind that there are other factors to consider, too.
We note that hedge funds don't have a meaningful investment in Nkarta. RA Capital Management, L.P. is currently the company's largest shareholder with 17% of shares outstanding. SR One Capital Management, LP is the second largest shareholder owning 9.3% of common stock, and New Enterprise Associates, Inc. holds about 8.8% of the company stock. Furthermore, CEO Paul Hastings is the owner of 0.7% of the company's shares.
On looking further, we found that 50% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.
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 Nkarta
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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.
Shareholders would probably be interested to learn that insiders own shares in Nkarta, Inc.. As individuals, the insiders collectively own US$4.1m worth of the US$400m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.
General Public Ownership
With a 11% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Nkarta. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Equity Ownership
Private equity firms hold a 56% stake in Nkarta. 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.
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 Nkarta is showing 4 warning signs in our investment analysis , and 2 of those can't be ignored...
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.
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.