Could The Sierra Oncology, Inc. (NASDAQ:SRRA) Ownership Structure Tell Us Something Useful?

By
Simply Wall St
Published
July 01, 2021
NasdaqGM:SRRA
Source: Shutterstock

The big shareholder groups in Sierra Oncology, Inc. (NASDAQ:SRRA) have power over the company. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. Companies that used to be publicly owned tend to have lower insider ownership.

With a market capitalization of US$240m, Sierra Oncology is a small cap stock, so it might not be well known by many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutions own shares in the company. Let's take a closer look to see what the different types of shareholders can tell us about Sierra Oncology.

Check out our latest analysis for Sierra Oncology

ownership-breakdown
NasdaqGM:SRRA Ownership Breakdown July 1st 2021

What Does The Institutional Ownership Tell Us About Sierra Oncology?

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.

Sierra Oncology 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 Sierra Oncology's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
NasdaqGM:SRRA Earnings and Revenue Growth July 1st 2021

It would appear that 15% of Sierra Oncology shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Vivo Capital, LLC is currently the company's largest shareholder with 16% of shares outstanding. The second and third largest shareholders are Longitude Capital Management Co., LLC and OrbiMed Advisors LLC, with an equal amount of shares to their name at 12%.

Our research also brought to light the fact that roughly 55% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

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 Sierra Oncology

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our information suggests that Sierra Oncology, Inc. insiders own under 1% of the company. It seems the board members have no more than US$422k worth of shares in the US$240m company. I 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 11% ownership, the general public have some degree of sway over Sierra Oncology. 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 47% stake in Sierra Oncology. 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 5.9% of Sierra Oncology. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

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. Take risks for example - Sierra Oncology has 3 warning signs (and 1 which is a bit unpleasant) we think you should know about.

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. 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.
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