Could The NGM Biopharmaceuticals, Inc. (NASDAQ:NGM) Ownership Structure Tell Us Something Useful?
A look at the shareholders of NGM Biopharmaceuticals, Inc. (NASDAQ:NGM) can tell us which group is most powerful. 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.
With a market capitalization of US$1.9b, NGM Biopharmaceuticals is a decent size, so it is probably on the radar of institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutions own shares in the company. Let's delve deeper into each type of owner, to discover more about NGM Biopharmaceuticals.
View our latest analysis for NGM Biopharmaceuticals
What Does The Institutional Ownership Tell Us About NGM Biopharmaceuticals?
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.
We can see that NGM Biopharmaceuticals does have institutional investors; and they hold a good portion of the company's stock. 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 NGM Biopharmaceuticals, (below). Of course, keep in mind that there are other factors to consider, too.
We note that hedge funds don't have a meaningful investment in NGM Biopharmaceuticals. The Column Group LLC is currently the largest shareholder, with 24% of shares outstanding. With 18% and 6.7% of the shares outstanding respectively, Merck & Co., Inc. and Prospect Venture Partners are the second and third largest shareholders.
On looking further, we found that 54% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.
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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of NGM Biopharmaceuticals
The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
I can report that insiders do own shares in NGM Biopharmaceuticals, Inc.. This is a big company, so it is good to see this level of alignment. Insiders own US$112m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.
General Public Ownership
With a 16% ownership, the general public have some degree of sway over NGM Biopharmaceuticals. 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 an ownership of 36%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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.
Public Company Ownership
Public companies currently own 18% of NGM Biopharmaceuticals stock. 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:
It's always worth thinking about the different groups who own shares in a company. But to understand NGM Biopharmaceuticals better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for NGM Biopharmaceuticals you should know about.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.
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. 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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