Avadel Pharmaceuticals plc (NASDAQ:AVDL) is definitely on the radar of institutional investors who own 39% of the company
A look at the shareholders of Avadel Pharmaceuticals plc (NASDAQ:AVDL) can tell us which group is most powerful. The group holding the most number of shares in the company, around 39% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).
Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.
Let's take a closer look to see what the different types of shareholders can tell us about Avadel Pharmaceuticals.
Check out our latest analysis for Avadel Pharmaceuticals
What Does The Institutional Ownership Tell Us About Avadel Pharmaceuticals?
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.
Avadel Pharmaceuticals already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Avadel Pharmaceuticals' historic earnings and revenue below, but keep in mind there's always more to the story.
It would appear that 22% of Avadel Pharmaceuticals shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. RTW Investments, LP is currently the largest shareholder, with 9.5% of shares outstanding. For context, the second largest shareholder holds about 7.0% of the shares outstanding, followed by an ownership of 6.2% by the third-largest shareholder.
We did some more digging and found that 9 of the top shareholders account for roughly 53% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.
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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Avadel Pharmaceuticals
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
We can report that insiders do own shares in Avadel Pharmaceuticals plc. In their own names, insiders own US$26m worth of stock in the US$365m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.
General Public Ownership
With a 32% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Avadel Pharmaceuticals. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
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. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Avadel Pharmaceuticals (of which 2 make us uncomfortable!) you should know about.
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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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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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