With 71% ownership, RxSight, Inc. (NASDAQ:RXST) boasts of strong institutional backing

RxSIGHT, INC. -4.47%

RxSIGHT, INC.

RXST

47.22

-4.47%

Key Insights

  • Institutions' substantial holdings in RxSight implies that they have significant influence over the company's share price
  • A total of 16 investors have a majority stake in the company with 50% ownership

A look at the shareholders of RxSight, Inc. (NASDAQ:RXST) can tell us which group is most powerful. With 71% stake, institutions 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).

Given the vast amount of money and research capacities at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.

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

ownership-breakdown
NasdaqGM:RXST Ownership Breakdown May 30th 2024

What Does The Institutional Ownership Tell Us About RxSight?

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.

RxSight already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 RxSight's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NasdaqGM:RXST Earnings and Revenue Growth May 30th 2024

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in RxSight. Looking at our data, we can see that the largest shareholder is RA Capital Management, L.P. with 8.8% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 5.4% of common stock, and Artisan Partners Limited Partnership holds about 4.9% of the company stock. Furthermore, CEO Ronald Kurtz is the owner of 2.1% of the company's shares.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 16 shareholders, meaning that no single shareholder has a majority interest in the ownership.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of RxSight

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

We can report that insiders do own shares in RxSight, Inc.. This is a big company, so it is good to see this level of alignment. Insiders own US$117m worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 15% ownership, the general public, mostly comprising of individual investors, have some degree of sway over RxSight. 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

Private equity firms hold a 8.8% stake in RxSight. 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.

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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