Private companies who have a significant stake must be disappointed along with institutions after Scilex Holding Company's (NASDAQ:SCLX) market cap dropped by US$22m

Key Insights

• Significant control over Scilex Holding by private companies implies that the general public has more power to influence management and governance-related decisions
• The top 2 shareholders own 55% of the company
• Insiders have bought recently

If you want to know who really controls Scilex Holding Company (NASDAQ:SCLX), then you'll have to look at the makeup of its share registry. We can see that private companies own the lion's share in the company with 46% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Following a 17% decrease in the stock price last week, private companies suffered the most losses, but institutions who own 22% stock also took a hit.

In the chart below, we zoom in on the different ownership groups of Scilex Holding.

Check out our latest analysis for Scilex Holding

What Does The Institutional Ownership Tell Us About Scilex Holding?

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 Scilex Holding. 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. 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 Scilex Holding, (below). Of course, keep in mind that there are other factors to consider, too.

It would appear that 9.1% of Scilex Holding shares are controlled by hedge funds. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Our data shows that Sclx Stock Acquisition Jv Llc is the largest shareholder with 46% of shares outstanding. For context, the second largest shareholder holds about 9.1% of the shares outstanding, followed by an ownership of 5.6% 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 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 Scilex Holding

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.

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 Scilex Holding Company insiders own under 1% of the company. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It appears that the board holds about US$937k worth of stock. This compares to a market capitalization of US$116m. 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 21% stake in Scilex Holding. 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 Company Ownership

Our data indicates that Private Companies hold 46%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should learn about the 3 warning signs we've spotted with Scilex Holding (including 1 which shouldn't be ignored) .

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.

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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.