The considerable ownership by private equity firms in IO Biotech indicates that they collectively have a greater say in management and business strategy
A total of 5 investors have a majority stake in the company with 54% ownership
To get a sense of who is truly in control of IO Biotech, Inc. (NASDAQ:IOBT), it is important to understand the ownership structure of the business. We can see that private equity firms own the lion's share in the company with 59% ownership. 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 US$19m market cap gain, institutions too had a 22% share in those profits.
Let's delve deeper into each type of owner of IO Biotech, beginning with the chart below.
What Does The Institutional Ownership Tell Us About IO Biotech?
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 IO Biotech. 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see IO Biotech's historic earnings and revenue below, but keep in mind there's always more to the story.
NasdaqGS:IOBT Earnings and Revenue Growth July 21st 2024
We note that hedge funds don't have a meaningful investment in IO Biotech. Lundbeckfonden BioCapital is currently the company's largest shareholder with 21% of shares outstanding. For context, the second largest shareholder holds about 10% of the shares outstanding, followed by an ownership of 9.4% by the third-largest shareholder.
On looking further, we found that 54% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of IO Biotech
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
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.
Our information suggests that IO Biotech, Inc. insiders own under 1% of the company. It seems the board members have no more than US$245k worth of shares in the US$104m company. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.
General Public Ownership
The general public, who are usually individual investors, hold a 19% stake in IO Biotech. 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 59% stake in IO Biotech. This suggests they can be influential in key policy decisions. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand IO Biotech better, we need to consider many other factors. For example, we've discovered 3 warning signs for IO Biotech (2 shouldn't be ignored!) that you should be aware of before investing here.
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.
