Institutional investors may overlook Merus N.V.'s (NASDAQ:MRUS) recent US$113m market cap drop as long-term gains remain positive
Key Insights
Significantly high institutional ownership implies Merus' stock price is sensitive to their trading actions
The top 11 shareholders own 52% of the company
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
If you want to know who really controls Merus N.V. (NASDAQ:MRUS), then you'll have to look at the makeup of its share registry. With 68% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Institutional investors was the group most impacted after the company's market cap fell to US$1.2b last week. However, the 14% 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.
Let's take a closer look to see what the different types of shareholders can tell us about Merus.
Check out our latest analysis for Merus
What Does The Institutional Ownership Tell Us About Merus?
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.
We can see that Merus does have institutional investors; and they hold a good portion of the company's stock. 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 Merus' historic earnings and revenue below, but keep in mind there's always more to the story.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. It would appear that 12% of Merus 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 Incyte Corporation is the largest shareholder with 7.1% of shares outstanding. For context, the second largest shareholder holds about 6.3% of the shares outstanding, followed by an ownership of 6.0% by the third-largest shareholder.
After doing some more digging, we found that the top 11 have the combined ownership of 52% in the company, suggesting that no single shareholder has significant control over the company.
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 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 Merus
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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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.
Our most recent data indicates that insiders own less than 1% of Merus N.V.. Keep in mind that it's a big company, and the insiders own US$7.7m worth of shares. The absolute value might be more important than the proportional share. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.
General Public Ownership
The general public-- including retail investors -- own 13% stake in the company, and hence can't easily be ignored. 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.
Public Company Ownership
We can see that public companies hold 7.1% of the Merus shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Merus is showing 2 warning signs in our investment analysis , 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.
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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