FibroGen, Inc.'s (NASDAQ:FGEN) institutional investors lost 4.0% last week but have benefitted from longer-term gains
Key Insights
Given the large stake in the stock by institutions, FibroGen's stock price might be vulnerable to their trading decisions
A total of 9 investors have a majority stake in the company with 52% ownership
To get a sense of who is truly in control of FibroGen, Inc. (NASDAQ:FGEN), it is important to understand the ownership structure of the business. With 79% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 4.0% in value last week. However, the 38% one-year return to shareholders might have softened the blow. 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 FibroGen.
View our latest analysis for FibroGen
What Does The Institutional Ownership Tell Us About FibroGen?
Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.
FibroGen already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 FibroGen's earnings history below. Of course, the future is what really matters.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in FibroGen. Our data shows that PRIMECAP Management Company is the largest shareholder with 14% of shares outstanding. For context, the second largest shareholder holds about 9.0% of the shares outstanding, followed by an ownership of 7.5% by the third-largest shareholder.
We also observed that the top 9 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of FibroGen
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.
Our most recent data indicates that insiders own some shares in FibroGen, Inc.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around US$26m 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 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over FibroGen. 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 5.1%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.
Next Steps:
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for FibroGen (of which 1 shouldn't be ignored!) 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.
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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.
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