Sonendo, Inc.’s (NYSE:SONX) latest 14% decline adds to one-year losses, institutional investors may consider drastic measures

Important Findings

• Significantly high institutional ownership implies that Sonendo’s stock price is sensitive to their trading activity
• 51% of the company is held by the top 6 shareholders
• Recent insider purchases

To get a sense of who really controls Sonendo, Inc. (NYSE:SONX), it’s important to understand the company’s ownership structure. With 43%, institutions own the maximum shares in the company. That is, the group will benefit most when the stock goes up (or lose most when it goes down).

As a result, institutional investors suffered their heaviest losses last week after the market cap fell $17 million. Needless to say, the recent loss, which further adds to shareholders’ one-year loss of 41%, may not go down well with this particular category of shareholders. Institutions, often referred to as “market makers,” wield significant power in influencing the price momentum of any stock. Consequently, if the downtrend continues, institutions could come under pressure to sell Sonendo, which could have a negative impact on individual investors.

Let’s take a closer look at what the different types of shareholders can tell us about Sonendo.

Check out our latest analysis for Sonendo

What does institutional ownership tell us about Sonendo?

Institutional investors typically compare their own returns to the returns of a commonly tracked index. As such, they typically consider buying larger companies that are included in the relevant benchmark index.

We can see that Sonendo has institutional investors; and they hold a good portion of the company’s stock. This means that the analysts who work for these institutes have looked at the stock and like it. But just like everyone else, they can be wrong. When multiple institutions own a stock, there is always a risk that they will find themselves in a “crowded trade”. When such a trade goes awry, multiple parties can compete to sell shares quickly. This risk is higher in a company without a growth history. You can see Sonendo’s historical earnings and earnings below, but remember there’s still more to be told.

It looks like hedge funds own 31% of Sonendo stock. This catches my attention because hedge funds sometimes try to influence management or enact changes that create value for shareholders in the short term. ArrowMark Colorado Holdings, LLC is currently the largest shareholder with 12% of the outstanding shares. By comparison, the second- and third-largest shareholders hold about 10% and 9.3% of the shares, respectively. In addition, the company’s CEO, Bjarne Bergheim, directly owns 0.8% of the total outstanding shares.

Upon further examination, we found that more than half of the company’s stock is owned by the top six shareholders, suggesting that the interests of the larger shareholders are to some extent balanced by the smaller ones.

While examining a company’s institutional ownership can add value to your research, it’s also a good practice to research analyst recommendations to gain a deeper understanding of a stock’s expected performance. There are a fair number of analysts covering the stock, so it might be helpful to get their overall view on the future.

Insider ownership of Sonendo

The definition of corporate insider can be subjective and varies by jurisdiction. Our data reflects individual insiders and captures at least board members. Management ultimately reports to the board of directors. However, it is not uncommon for managers to be members of the executive board, especially if they are founders or CEOs.

Most view insider ownership as a positive, as it can indicate that the board is well aligned with other shareholders. In some cases, however, too much power is concentrated within this group.

We can report that insiders own Sonendo, Inc. stock. It has a market cap of just $107 million, and insiders have $5.2 million worth of shares in their own names. This at least shows some alignment, but we usually like to see larger insider holdings. You can click here to see if these Insiders have bought or sold.

General Public Property

The general public — including retail investors — own a 20% stake in the company, so it can’t be ignored. While this ownership size is substantial, it may not be enough to change company policy if the decision is not aligned with other major shareholders.

Next Steps:

While it’s worth considering the different groups that own a business, there are other factors that are even more important. For example, we have identified 3 warning signs for Sonendo (2 are a bit uncomfortable) that you should be aware of.

But ultimately it is the future, not the past that determines how well the owners of this business will do. Therefore, we think it’s wise to take a look at this free report that shows whether analysts are predicting a brighter future.

Note: The figures in this article are calculated using data for the last twelve months, relating to the 12-month period ending on the last date of the month to which the financial statements are dated. This may not match the figures in the full year report.

Do you have any feedback about this article? Concerned about the content? Get in touch directly with us. Alternatively, send an email to the editorial team (at) simplywallst.com.

This Simply Wall St article is of a general nature. We provide comments based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your goals or financial situation. Our goal is to offer you long-term focused analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.