89bio, Inc.'s (NASDAQ:ETNB) one-year returns climbed after last week's 7.0% gain, institutional investors must be happy
Key Insights
Significantly high institutional ownership implies 89bio's stock price is sensitive to their trading actions
51% of the business is held by the top 13 shareholders
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
If you want to know who really controls 89bio, Inc. (NASDAQ:ETNB), then you'll have to look at the makeup of its share registry. With 64% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
Last week’s 7.0% gain means that institutional investors were on the positive end of the spectrum even as the company has shown strong longer-term trends. The one-year return on investment is currently 4.3% and last week's gain would have been more than welcomed.
Let's take a closer look to see what the different types of shareholders can tell us about 89bio.
See our latest analysis for 89bio
What Does The Institutional Ownership Tell Us About 89bio?
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.
89bio 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. 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 89bio, (below). Of course, keep in mind that there are other factors to consider, too.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Our data indicates that hedge funds own 5.2% of 89bio. 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. Our data shows that RA Capital Management, L.P. is the largest shareholder with 12% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.3% and 5.2%, of the shares outstanding, respectively.
After doing some more digging, we found that the top 13 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.
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 89bio
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 data suggests that insiders own under 1% of 89bio, Inc. in their own names. It seems the board members have no more than US$6.4m worth of shares in the US$934m 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
With a 17% ownership, the general public, mostly comprising of individual investors, have some degree of sway over 89bio. 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 a stake of 12%, private equity firms could influence the 89bio 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:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 5 warning signs for 89bio (3 make us uncomfortable!) that you should be aware of before investing here.
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.
