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Could The Aileron Therapeutics, Inc. (NASDAQ:ALRN) Ownership Structure Tell Us Something Useful?

Gerald Huddleston

Every investor in Aileron Therapeutics, Inc. (NASDAQ:ALRN) should be aware of the most powerful shareholder groups. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I quite like to see at least a little bit of insider ownership. As Charlie Munger said ‘Show me the incentive and I will show you the outcome.’

Aileron Therapeutics is a smaller company with a market capitalization of US$11m, so it may still be flying under the radar of many institutional investors. Taking a look at the our data on the ownership groups (below), it’s seems that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about ALRN.

View our latest analysis for Aileron Therapeutics

NasdaqGM:ALRN Ownership Summary December 21st 18

What Does The Institutional Ownership Tell Us About Aileron 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.

As you can see, institutional investors own 22% of Aileron Therapeutics. 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. 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 Aileron Therapeutics, (below). Of course, keep in mind that there are other factors to consider, too.

NasdaqGM:ALRN Income Statement Export December 21st 18

Hedge funds don’t have many shares in Aileron Therapeutics. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Aileron Therapeutics

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

I can report that insiders do own shares in Aileron Therapeutics, Inc.. In their own names, insiders own US$730k worth of stock in the US$11m company. This shows at least some alignment, but I usually like to see larger insider holdings. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 20% ownership, the general public have some degree of sway over ALRN. 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

With a stake of 40%, private equity firms could influence the ALRN board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Private Company Ownership

Our data indicates that Private Companies hold 7.3%, of the company’s shares. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it’s hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Public Company Ownership

We can see that public companies hold 4.8%, of the ALRN shares on issue. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.