Key Insights

• Significant control over NeuroPace by private equity firms implies that the general public has more power to influence management and governance-related decisions
• The top 4 shareholders own 53% of the company
• Institutional ownership in NeuroPace is 26%

A look at the shareholders of NeuroPace, Inc. (NASDAQ:NPCE) can tell us which group is most powerful. With 45% stake, private equity firms possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Following a 19% increase in the stock price last week, private equity firms profited the most, but institutions who own 26% stock also stood to gain from the increase.

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

See our latest analysis for NeuroPace

What Does The Institutional Ownership Tell Us About NeuroPace?

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.

We can see that NeuroPace does have institutional investors; and they hold a good portion of the company's stock. 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. 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 NeuroPace, (below). Of course, keep in mind that there are other factors to consider, too.

It would appear that 13% of NeuroPace shares are controlled by hedge funds. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. The company's largest shareholder is KCK Group, with ownership of 18%. With 15% and 12% of the shares outstanding respectively, Accelmed Partners and OrbiMed Advisors LLC are the second and third largest shareholders.

Our research also brought to light the fact that roughly 53% 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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of NeuroPace

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. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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 see that insiders own shares in NeuroPace, Inc.. It has a market capitalization of just US$221m, and insiders have US$9.2m worth of shares, in their own names. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 12% ownership, the general public, mostly comprising of individual investors, have some degree of sway over NeuroPace. 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 45% stake in NeuroPace. This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

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. For example, we've discovered 2 warning signs for NeuroPace that you should be aware of before investing here.

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.