Solid Biosciences Inc.'s (NASDAQ:SLDB) market cap dropped US$53m last week; Private equity firms bore the brunt

Key Insights

• Significant control over Solid Biosciences 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 7 shareholders
• Recent purchases by insiders

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A look at the shareholders of Solid Biosciences Inc. (NASDAQ:SLDB) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are private equity firms with 36% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And last week, private equity firms endured the biggest losses as the stock fell by 12%.

In the chart below, we zoom in on the different ownership groups of Solid Biosciences.

See our latest analysis for Solid Biosciences

What Does The Institutional Ownership Tell Us About Solid Biosciences?

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 Solid Biosciences. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Solid Biosciences' earnings history below. Of course, the future is what really matters.

It would appear that 13% of Solid Biosciences shares are controlled by hedge funds. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Looking at our data, we can see that the largest shareholder is Perceptive Advisors LLC with 15% of shares outstanding. With 8.3% and 7.5% of the shares outstanding respectively, Artal Group S.A. and Commodore Capital LP are the second and third largest shareholders.

On further inspection, we found that more than half the company's shares are owned by the top 7 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Solid Biosciences

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.

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 Solid Biosciences Inc. insiders own under 1% of the company. It has a market capitalization of just US$415m, and the board has only US$2.5m worth of shares in their own names. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.

General Public Ownership

With a 29% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Solid Biosciences. 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 36% stake in Solid Biosciences. This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Solid Biosciences (at least 2 which are a bit concerning) , and understanding them should be part of your investment process.

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.

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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.