individual investors who own 37% along with institutions invested in Verastem, Inc. (NASDAQ:VSTM) saw increase in their holdings value last week
A look at the shareholders of Verastem, Inc. (NASDAQ:VSTM) can tell us which group is most powerful. We can see that individual investors own the lion's share in the company with 37% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
While individual investors were the group that benefitted the most from last week’s US$13m market cap gain, institutions too had a 31% share in those profits.
Let's take a closer look to see what the different types of shareholders can tell us about Verastem.
Check out our latest analysis for Verastem
What Does The Institutional Ownership Tell Us About Verastem?
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 Verastem. 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. 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 Verastem's historic earnings and revenue below, but keep in mind there's always more to the story.
It would appear that 22% of Verastem 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. Our data shows that Baker Bros. Advisors LP is the largest shareholder with 13% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 9.5% and 8.2%, of the shares outstanding, respectively. Furthermore, CEO Brian Stuglik is the owner of 0.5% of the company's shares.
After doing some more digging, we found that the top 11 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over 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. 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 Verastem
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.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
We can report that insiders do own shares in Verastem, Inc.. As individuals, the insiders collectively own US$1.1m worth of the US$105m 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 37% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Verastem. 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 8.2%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we've spotted 4 warning signs for Verastem 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.
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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