Private equity firms who hold 44% of EBR Systems, Inc. (ASX:EBR) gained 15%, institutions profited as well

Key Insights

• Significant control over EBR Systems by vc/pe firms implies that this group likely has considerable sway over management and governance-related decisions
• The top 4 shareholders own 58% of the company
• own 35% of EBR Systems

A look at the shareholders of EBR Systems, Inc. (ASX:EBR) can tell us which group is most powerful. The group holding the most number of shares in the company, around 44% to be precise, is private equity firms. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While private equity firms were the group that benefitted the most from last week’s AU$22m market cap gain, institutions too had a 35% share in those profits.

In the chart below, we zoom in on the different ownership groups of EBR Systems.

See our latest analysis for EBR Systems

What Does The Institutional Ownership Tell Us About EBR Systems?

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 EBR Systems. 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 EBR Systems’ earnings history below. Of course, the future is what really matters.

Hedge funds don’t have many shares in EBR Systems. The company’s largest shareholder is Brandon Capital Partners, with ownership of 26%. Orbis Investment Management Limited is the second largest shareholder owning 14% of common stock, and Split Rock Partners, LLC holds about 9.9% of the company stock.

Our research also brought to light the fact that roughly 58% of the company is controlled by the top 4 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of EBR Systems

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. 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.

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.

We can report that insiders do own shares in EBR Systems, Inc.. It has a market capitalization of just AU$169m, and insiders have AU$7.8m worth of shares, in their own names. It is good to see some investment by insiders, but we usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 14% stake in EBR Systems. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Equity Ownership

Private equity firms hold a 44% stake in EBR Systems. 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. Consider for instance, the ever-present spectre of investment risk. We’ve identified 3 warning signs with EBR Systems (at least 2 which are concerning) , and understanding them should be part of your investment process.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.