Could The Smith Micro Software, Inc. (NASDAQ:SMSI) Ownership Structure Tell Us Something Useful?

The big shareholder groups in Smith Micro Software, Inc. (NASDAQ:SMSI) have power over the company. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Warren Buffett said that he likes ‘a business with enduring competitive advantages that is run by able and owner-oriented people’. So it’s nice to see some insider ownership, because it may suggest that management is owner-oriented.

With a market capitalization of US$93m, Smith Micro Software 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’s seems that institutions own shares in the company. Let’s take a closer look to see what the different types of shareholder can tell us about SMSI.

Check out our latest analysis for Smith Micro Software

NasdaqCM:SMSI Ownership Summary, April 25th 2019
NasdaqCM:SMSI Ownership Summary, April 25th 2019

What Does The Institutional Ownership Tell Us About Smith Micro Software?

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.

Smith Micro Software already has institutions on the share registry. Indeed, they own 17% of the company. 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. 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 Smith Micro Software, (below). Of course, keep in mind that there are other factors to consider, too.

NasdaqCM:SMSI Income Statement, April 25th 2019
NasdaqCM:SMSI Income Statement, April 25th 2019

We note that hedge funds don’t have a meaningful investment in Smith Micro Software. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Smith Micro Software

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. 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.

It seems insiders own a significant proportion of Smith Micro Software, Inc.. Insiders own US$18m worth of shares in the US$93m company. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public, who are mostly retail investors, collectively hold 54% of Smith Micro Software shares. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Private Company Ownership

Our data indicates that Private Companies hold 10%, 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:

It’s always worth thinking about the different groups who own shares in a company. But to understand Smith Micro Software better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.