Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) stock most popular amongst private equity firms who own 49%, while individual investors hold 25%
Key Insights
Significant control over Lexicon Pharmaceuticals by private equity firms implies that the general public has more power to influence management and governance-related decisions
A total of 2 investors have a majority stake in the company with 55% ownership
If you want to know who really controls Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX), 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 49% to be precise, is private equity firms. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Individual investors, on the other hand, account for 25% of the company's stockholders.
In the chart below, we zoom in on the different ownership groups of Lexicon Pharmaceuticals.
Check out our latest analysis for Lexicon Pharmaceuticals
What Does The Institutional Ownership Tell Us About Lexicon 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.
Lexicon Pharmaceuticals already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Lexicon Pharmaceuticals' historic earnings and revenue below, but keep in mind there's always more to the story.
It looks like hedge funds own 6.7% of Lexicon Pharmaceuticals shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. The company's largest shareholder is Artal Group S.A., with ownership of 49%. For context, the second largest shareholder holds about 6.7% of the shares outstanding, followed by an ownership of 2.3% by the third-largest shareholder.
To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of 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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Lexicon Pharmaceuticals
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
We can see that insiders own shares in Lexicon Pharmaceuticals, Inc.. It has a market capitalization of just US$463m, and insiders have US$4.7m worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.
General Public Ownership
With a 25% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Lexicon Pharmaceuticals. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
Private Equity Ownership
With a stake of 49%, private equity firms could influence the Lexicon Pharmaceuticals board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.
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. To that end, you should learn about the 4 warning signs we've spotted with Lexicon Pharmaceuticals (including 1 which is a bit concerning) .
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.
