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Individual investors who have a significant stake must be disappointed along with institutions after Verona Pharma plc's (NASDAQ:VRNA) market cap dropped by US$69m

·5 min read

If you want to know who really controls Verona Pharma plc (NASDAQ:VRNA), 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 46% to be precise, is individual investors. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While institutions, who own 24% shares weren’t spared from last week’s US$69m market cap drop, individual investors as a group suffered the maximum losses

Let's take a closer look to see what the different types of shareholders can tell us about Verona Pharma.

See our latest analysis for Verona Pharma

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About Verona Pharma?

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.

We can see that Verona Pharma does have institutional investors; and they hold a good portion of the company's stock. 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 Verona Pharma's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
earnings-and-revenue-growth

Verona Pharma is not owned by hedge funds. Ai Biotechnology Llc is currently the largest shareholder, with 8.0% of shares outstanding. In comparison, the second and third largest shareholders hold about 6.9% and 6.5% of the stock. Additionally, the company's CEO David Zaccardelli directly holds 1.2% of the total shares outstanding.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 15 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Verona Pharma

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 Verona Pharma plc. In their own names, insiders own US$26m worth of stock in the US$873m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

With a 46% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Verona Pharma. 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 20%, private equity firms could influence the Verona Pharma board. 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.

Private Company Ownership

Our data indicates that Private Companies hold 8.0%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Verona Pharma better, we need to consider many other factors. Take risks for example - Verona Pharma has 4 warning signs (and 2 which are significant) we think you should know about.

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.

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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