Q32 Bio Inc.'s (NASDAQ:QTTB) last week's 15% decline must have disappointed private equity firms who have a significant stake

Key Insights

• Significant control over Q32 Bio by private equity firms implies that the general public has more power to influence management and governance-related decisions
• 52% of the business is held by the top 4 shareholders
• Institutions own 16% of Q32 Bio

To get a sense of who is truly in control of Q32 Bio Inc. (NASDAQ:QTTB), it is important to understand the ownership structure of the business. We can see that private equity firms own the lion's share in the company with 52% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And following last week's 15% decline in share price, private equity firms suffered the most losses.

In the chart below, we zoom in on the different ownership groups of Q32 Bio.

Check out our latest analysis for Q32 Bio

What Does The Institutional Ownership Tell Us About Q32 Bio?

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.

Q32 Bio 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. 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 Q32 Bio's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Q32 Bio. OrbiMed Advisors LLC is currently the largest shareholder, with 19% of shares outstanding. For context, the second largest shareholder holds about 18% of the shares outstanding, followed by an ownership of 9.2% by the third-largest shareholder.

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.

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 Q32 Bio

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

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 less than 1% of Q32 Bio Inc.. It seems the board members have no more than US$753k worth of shares in the US$176m 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-- including retail investors -- own 25% 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

Private equity firms hold a 52% stake in Q32 Bio. 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.

Public Company Ownership

It appears to us that public companies own 6.4% of Q32 Bio. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 4 warning signs for Q32 Bio (2 are significant!) that you should be aware of before investing here.

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.

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