ESSA Pharma Inc.'s (NASDAQ:EPIX) recent 12% pullback adds to one-year year losses, institutional owners may take drastic measures
Key Insights
Institutions' substantial holdings in ESSA Pharma implies that they have significant influence over the company's share price
The top 4 shareholders own 55% of the company
Every investor in ESSA Pharma Inc. (NASDAQ:EPIX) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 40% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
As a result, institutional investors endured the highest losses last week after market cap fell by US$18m. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 59% for shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the downtrend continues, institutions may face pressures to sell ESSA Pharma, which might have negative implications on individual investors.
Let's take a closer look to see what the different types of shareholders can tell us about ESSA Pharma.
Check out our latest analysis for ESSA Pharma
What Does The Institutional Ownership Tell Us About ESSA Pharma?
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.
We can see that ESSA Pharma does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at ESSA Pharma's earnings history below. Of course, the future is what really matters.
It would appear that 37% of ESSA Pharma shares are controlled by hedge funds. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. BVF Partners L.P. is currently the company's largest shareholder with 20% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 18% and 8.8%, of the shares outstanding, respectively.
To make our study more interesting, we found that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.
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 ESSA Pharma
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 ESSA Pharma Inc.. As individuals, the insiders collectively own US$2.7m worth of the US$131m company. It is good to see some investment by insiders, but we usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.
General Public Ownership
With a 17% ownership, the general public, mostly comprising of individual investors, have some degree of sway over ESSA Pharma. 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.
Public Company Ownership
It appears to us that public companies own 3.8% of ESSA Pharma. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - ESSA Pharma has 3 warning signs (and 1 which is significant) we think 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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