Private equity firms account for 27% of Nine Energy Service, Inc.'s (NYSE:NINE) ownership, while institutions account for 25%

Every investor in Nine Energy Service, Inc. (NYSE:NINE) should be aware of the most powerful shareholder groups. With 27% stake, private equity firms possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Institutions, on the other hand, account for 25% of the company's stockholders. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies.

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

See our latest analysis for Nine Energy Service

What Does The Institutional Ownership Tell Us About Nine Energy Service?

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 Nine Energy Service 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 Nine Energy Service, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Nine Energy Service. SCF Partners, Inc. is currently the largest shareholder, with 27% of shares outstanding. With 13% and 10% of the shares outstanding respectively, Clarity Financial, LLC and Warren Frazier are the second and third largest shareholders. In addition, we found that Ann Fox, the CEO has 2.1% of the shares allocated to their name.

A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 50% stake.

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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Nine Energy Service

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 Nine Energy Service, Inc.. Insiders own US$101m worth of shares in the US$444m 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

With a 25% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Nine Energy Service. 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

With a stake of 27%, private equity firms could influence the Nine Energy Service board. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Nine Energy Service better, we need to consider many other factors. Be aware that Nine Energy Service is showing 4 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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