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The big shareholder groups in Concert Pharmaceuticals, Inc. (NASDAQ:CNCE) have power over the company. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.
Concert Pharmaceuticals is a smaller company with a market capitalization of US$113m, so it may still be flying under the radar of many institutional investors. In the chart below, we can see that institutions own shares in the company. Let's delve deeper into each type of owner, to discover more about Concert Pharmaceuticals.
What Does The Institutional Ownership Tell Us About Concert Pharmaceuticals?
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.
As you can see, institutional investors have a fair amount of stake in Concert Pharmaceuticals. 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 Concert Pharmaceuticals' historic earnings and revenue below, but keep in mind there's always more to the story.
Hedge funds don't have many shares in Concert Pharmaceuticals. RA Capital Management, L.P. is currently the company's largest shareholder with 9.4% of shares outstanding. For context, the second largest shareholder holds about 6.7% of the shares outstanding, followed by an ownership of 4.5% by the third-largest shareholder. In addition, we found that Roger Tung, the CEO has 2.5% of the shares allocated to their name.
After doing some more digging, we found that the top 14 have the combined ownership of 50% 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Concert 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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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.
I can report that insiders do own shares in Concert Pharmaceuticals, Inc.. As individuals, the insiders collectively own US$6.7m worth of the US$113m company. This shows at least some alignment, but I usually like to see larger insider holdings. You can click here to see if those insiders have been buying or selling.
General Public Ownership
With a 30% ownership, the general public have some degree of sway over Concert Pharmaceuticals. 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 16%, private equity firms could influence the Concert 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
It appears to us that public companies own 3.7% of Concert Pharmaceuticals. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Concert Pharmaceuticals , and understanding them should be part of your investment process.
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.
This article by Simply Wall St is general in nature. 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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