Institutional owners may ignore Phathom Pharmaceuticals, Inc.'s (NASDAQ:PHAT) recent US$66m market cap decline as longer-term profits stay in the green
Key Insights
Given the large stake in the stock by institutions, Phathom Pharmaceuticals' stock price might be vulnerable to their trading decisions
A total of 8 investors have a majority stake in the company with 53% ownership
A look at the shareholders of Phathom Pharmaceuticals, Inc. (NASDAQ:PHAT) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 37% ownership. 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$643m last week. However, the 58% one-year return to shareholders might have softened the blow. They should, however, be mindful of further losses in the future.
Let's take a closer look to see what the different types of shareholders can tell us about Phathom Pharmaceuticals.
Check out our latest analysis for Phathom Pharmaceuticals
What Does The Institutional Ownership Tell Us About Phathom Pharmaceuticals?
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.
Phathom Pharmaceuticals 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Phathom Pharmaceuticals, (below). Of course, keep in mind that there are other factors to consider, too.
We note that hedge funds don't have a meaningful investment in Phathom Pharmaceuticals. The company's largest shareholder is Frazier Life Sciences Management, LP, with ownership of 15%. Meanwhile, the second and third largest shareholders, hold 14% and 5.4%, of the shares outstanding, respectively.
On further inspection, we found that more than half the company's shares are owned by the top 8 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Phathom Pharmaceuticals
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.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our most recent data indicates that insiders own some shares in Phathom Pharmaceuticals, Inc.. As individuals, the insiders collectively own US$31m worth of the US$643m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public-- including retail investors -- own 24% 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.
Private Equity Ownership
With a stake of 21%, private equity firms could influence the Phathom Pharmaceuticals 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 14% of Phathom Pharmaceuticals stock. 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:
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 Phathom Pharmaceuticals is showing 6 warning signs in our investment analysis , and 3 of those are a bit concerning...
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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