Stock Analysis

SkyWater Technology, Inc.'s (NASDAQ:SKYT) stock price dropped 14% last week; private equity firms would not be happy

Source: Shutterstock

Key Insights

  • The considerable ownership by private equity firms in SkyWater Technology indicates that they collectively have a greater say in management and business strategy
  • The top 2 shareholders own 58% of the company
  • Recent sales by insiders

Every investor in SkyWater Technology, Inc. (NASDAQ:SKYT) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 47% to be precise, is private equity firms. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, private equity firms as a group endured the highest losses last week after market cap fell by US$89m.

Let's take a closer look to see what the different types of shareholders can tell us about SkyWater Technology.

Check out our latest analysis for SkyWater Technology

NasdaqCM:SKYT Ownership Breakdown March 15th 2023

What Does The Institutional Ownership Tell Us About SkyWater Technology?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in SkyWater Technology. 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. 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 SkyWater Technology's earnings history below. Of course, the future is what really matters.

NasdaqCM:SKYT Earnings and Revenue Growth March 15th 2023

We note that hedge funds don't have a meaningful investment in SkyWater Technology. The company's largest shareholder is Oxbow Industries, LLC, with ownership of 47%. Meanwhile, the second and third largest shareholders, hold 11% and 3.2%, of the shares outstanding, respectively. In addition, we found that Thomas Sonderman, the CEO has 1.1% of the shares allocated to their name.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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 SkyWater Technology

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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.

It seems insiders own a significant proportion of SkyWater Technology, Inc.. It has a market capitalization of just US$543m, and insiders have US$96m worth of shares in their own names. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 20% stake in SkyWater Technology. 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 SkyWater Technology. 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.

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 instance, we've identified 5 warning signs for SkyWater Technology that you should be aware of.

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.

Valuation is complex, but we're helping make it simple.

Find out whether SkyWater Technology is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis