Institutional owners may take dramatic actions as Foghorn Therapeutics Inc.'s (NASDAQ:FHTX) recent 11% drop adds to one-year losses
Key Insights
Institutions' substantial holdings in Foghorn Therapeutics implies that they have significant influence over the company's share price
A total of 4 investors have a majority stake in the company with 56% ownership
To get a sense of who is truly in control of Foghorn Therapeutics Inc. (NASDAQ:FHTX), it is important to understand the ownership structure of the business. With 37% 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.
And institutional investors saw their holdings value drop by 11% last week. The recent loss, which adds to a one-year loss of 69% for stockholders, may not sit well with this group of investors. Often called “market makers”, institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in Foghorn Therapeutics' share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.
Let's take a closer look to see what the different types of shareholders can tell us about Foghorn Therapeutics.
See our latest analysis for Foghorn Therapeutics
What Does The Institutional Ownership Tell Us About Foghorn Therapeutics?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
Foghorn Therapeutics 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. 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 Foghorn Therapeutics' historic earnings and revenue below, but keep in mind there's always more to the story.
Foghorn Therapeutics is not owned by hedge funds. The company's largest shareholder is Flagship Pioneering, with ownership of 30%. For context, the second largest shareholder holds about 9.6% of the shares outstanding, followed by an ownership of 8.7% by the third-largest shareholder. Cigall Kadoch, who is the third-largest shareholder, also happens to hold the title of Member of Advisory Board. In addition, we found that Adrian H. Gottschalk, the CEO has 1.2% of the shares allocated to their name.
Our research also brought to light the fact that roughly 56% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.
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 Foghorn Therapeutics
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. 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.
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 information suggests that insiders maintain a significant holding in Foghorn Therapeutics Inc.. Insiders own US$23m worth of shares in the US$198m company. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.
General Public Ownership
With a 12% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Foghorn Therapeutics. 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 a stake of 30%, private equity firms could influence the Foghorn Therapeutics 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
It appears to us that public companies own 9.6% of Foghorn Therapeutics. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.
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. Be aware that Foghorn Therapeutics 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.
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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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