If you want to know who really controls NGM Biopharmaceuticals, Inc. (NASDAQ:NGM), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 36% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).
After a year of 30% losses, last week’s 13% gain would be welcomed by institutional investors as a likely sign that returns might start trending higher.
In the chart below, we zoom in on the different ownership groups of NGM Biopharmaceuticals.
What Does The Institutional Ownership Tell Us About NGM Biopharmaceuticals?
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.
NGM Biopharmaceuticals already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see NGM Biopharmaceuticals' historic earnings and revenue below, but keep in mind there's always more to the story.
We note that hedge funds don't have a meaningful investment in NGM Biopharmaceuticals. The Column Group LLC is currently the company's largest shareholder with 26% of shares outstanding. In comparison, the second and third largest shareholders hold about 16% and 6.1% of the stock.
On looking further, we found that 53% 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 it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of NGM Biopharmaceuticals
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
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.
Shareholders would probably be interested to learn that insiders own shares in NGM Biopharmaceuticals, 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$69m 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 11% ownership, the general public, mostly comprising of individual investors, have some degree of sway over NGM Biopharmaceuticals. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Equity Ownership
With a stake of 32%, private equity firms could influence the NGM Biopharmaceuticals board. 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 16% of NGM Biopharmaceuticals stock. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.
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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for NGM Biopharmaceuticals (of which 1 is potentially serious!) you should know about.
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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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