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Could The EastWest Bioscience Inc. (CVE:EAST) Ownership Structure Tell Us Something Useful?

Simply Wall St

A look at the shareholders of EastWest Bioscience Inc. (CVE:EAST) can tell us which group is most powerful. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. 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.

EastWest Bioscience is a smaller company with a market capitalization of CA$2.9m, so it may still be flying under the radar of many institutional investors. In the chart below below, we can see that institutional investors have not yet purchased shares. Let's delve deeper into each type of owner, to discover more about EAST.

See our latest analysis for EastWest Bioscience

TSXV:EAST Ownership Summary, November 2nd 2019

What Does The Lack Of Institutional Ownership Tell Us About EastWest Bioscience?

Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it's unusual to see larger companies without any institutional investors.

There are multiple explanations for why institutions don't own a stock. The most common is that the company is too small relative to fund under management, so the institition does not bother to look closely at the company. On the other hand, it's always possible that professional investors are avoiding a company because they don't think it's the best place for their money. Institutional investors may not find the historic growth of the business impressive, or there might be other factors at play. You can see the past revenue performance of EastWest Bioscience, for yourself, below.

TSXV:EAST Income Statement, November 2nd 2019

Hedge funds don't have many shares in EastWest Bioscience. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of EastWest Bioscience

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.

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 insiders own a significant proportion of EastWest Bioscience Inc.. Insiders own CA$754k worth of shares in the CA$2.9m company. I would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are mostly retail investors, collectively hold 74% of EastWest Bioscience shares. This size of ownership gives retail investors collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

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.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.