Significant insider control over Summit Therapeutics implies vested interests in company growth
The largest shareholder of the company is Robert Duggan with a 79% stake
Every investor in Summit Therapeutics Inc. (NASDAQ:SMMT) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are individual insiders with 82% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
It's interesting to note that insiders have been buying shares recently. So the news of stock price falling by 20% is not something they might have been expecting soon after purchasing shares.
In the chart below, we zoom in on the different ownership groups of Summit Therapeutics.
What Does The Institutional Ownership Tell Us About Summit Therapeutics?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
Less than 5% of Summit Therapeutics is held by institutional investors. This suggests that some funds have the company in their sights, but many have not yet bought shares in it. If the business gets stronger from here, we could see a situation where more institutions are keen to buy. It is not uncommon to see a big share price rise if multiple institutional investors are trying to buy into a stock at the same time. So check out the historic earnings trajectory, below, but keep in mind it's the future that counts most.
We note that hedge funds don't have a meaningful investment in Summit Therapeutics. Looking at our data, we can see that the largest shareholder is the CEO Robert Duggan with 79% of shares outstanding. This implies that they possess majority interests and have significant control over the company. Investors usually consider it a good sign when the company leadership has such a significant stake, as this is widely perceived to increase the chance that the management will act in the best interests of the company. In comparison, the second and third largest shareholders hold about 3.5% and 1.4% of the stock. Interestingly, the second-largest shareholder, Mahkam Zanganeh is also Co-Chief Executive Officer, again, pointing towards strong insider ownership amongst the company's top shareholders.
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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.
Insider Ownership Of Summit Therapeutics
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
It seems that insiders own more than half the Summit Therapeutics Inc. stock. This gives them a lot of power. That means insiders have a very meaningful US$969m stake in this US$1.2b business. It is good to see this level of investment. You can check here to see if those insiders have been selling any of their shares.
General Public Ownership
With a 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Summit Therapeutics. 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.
It's always worth thinking about the different groups who own shares in a company. But to understand Summit Therapeutics better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for Summit Therapeutics you should be aware of.
If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.
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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