ESSA Pharma Inc.'s (NASDAQ:EPIX) hedge funds investors lost 12% last week but have benefitted from longer-term gains
Key Insights
Given the large stake in the stock by institutions, ESSA Pharma's stock price might be vulnerable to their trading decisions
A total of 4 investors have a majority stake in the company with 57% ownership
Every investor in ESSA Pharma Inc. (NASDAQ:EPIX) should be aware of the most powerful shareholder groups. With 39% stake, hedge funds possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
Hedge funds investors was the group most impacted after the company's market cap fell to US$388m last week. However, the 222% one-year returns may have helped alleviate their overall losses. We would assume however, that they would be on the lookout for weakness in the future.
In the chart below, we zoom in on the different ownership groups of ESSA Pharma.
See 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.
As you can see, institutional investors have a fair amount of stake in ESSA Pharma. 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 ESSA Pharma, (below). Of course, keep in mind that there are other factors to consider, too.
It would appear that 39% of ESSA Pharma shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. BVF Partners L.P. is currently the largest shareholder, with 20% of shares outstanding. With 18% and 9.7% of the shares outstanding respectively, Bellevue Asset Management AG and Soleus Capital Management, L.P. are the second and third largest shareholders.
Our research also brought to light the fact that roughly 57% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.
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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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.
We can report that insiders do own shares in ESSA Pharma Inc.. In their own names, insiders own US$8.8m worth of stock in the US$388m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public, who are usually individual investors, hold a 22% stake in 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.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 4 warning signs for ESSA Pharma (2 make us uncomfortable!) that you should be aware of before investing here.
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.
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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.
