Key Insights

• Significant control over Nine Energy Service by private equity firms implies that the general public has more power to influence management and governance-related decisions

• The top 4 shareholders own 50% of the company

• Recent sales by insiders

A look at the shareholders of Nine Energy Service, Inc. (NYSE:NINE) can tell us which group is most powerful. We can see that private equity firms own the lion's share in the company with 26% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Clearly, private equity firms benefitted the most after the company's market cap rose by US$19m last week.

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?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors have a fair amount of stake in Nine Energy Service. 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. 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 Nine Energy Service's historic earnings and revenue below, but keep in mind there's always more to the story.

It would appear that 9.4% of Nine Energy Service shares are controlled by hedge funds. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. SCF Partners, Inc. is currently the largest shareholder, with 26% of shares outstanding. Tontine Management, LLC is the second largest shareholder owning 9.4% of common stock, and Warren Frazier holds about 8.1% of the company stock. In addition, we found that Ann Fox, the CEO has 1.4% of the shares allocated to their name.

To make our study more interesting, we found that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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 some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Nine Energy Service

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.

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.

Our most recent data indicates that insiders own a reasonable proportion of Nine Energy Service, Inc.. Insiders own US$18m worth of shares in the US$101m 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

The general public-- including retail investors -- own 24% stake in the company, and hence can't easily be ignored. 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

With an ownership of 26%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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. Be aware that Nine Energy Service is showing 4 warning signs in our investment analysis , and 1 of those can't be ignored...

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.