Lexicon Pharmaceuticals, Inc.'s (NASDAQ:LXRX) largest shareholders are private equity firms with 48% ownership, institutions own 24%
Key Insights
Lexicon Pharmaceuticals' significant private equity firms ownership suggests that the key decisions are influenced by shareholders from the larger public
The top 2 shareholders own 56% of the company
Every investor in Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 48% to be precise, is private equity firms. Put another way, the group faces the maximum upside potential (or downside risk).
And institutions on the other hand have a 24% ownership in the company. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time.
Let's take a closer look to see what the different types of shareholders can tell us about Lexicon Pharmaceuticals.
View 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.
We can see that Lexicon Pharmaceuticals does have institutional investors; and they hold a good portion of the company's stock. 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 would appear that 8.2% of Lexicon Pharmaceuticals 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. Artal Group S.A. is currently the largest shareholder, with 48% of shares outstanding. BVF Partners L.P. is the second largest shareholder owning 8.2% of common stock, and FMR LLC holds about 3.1% of the company stock.
After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.
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 Lexicon Pharmaceuticals
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 Lexicon Pharmaceuticals, Inc.. It has a market capitalization of just US$361m, and insiders have US$5.6m worth of shares, in their own names. 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 18% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Equity Ownership
With an ownership of 48%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Lexicon Pharmaceuticals better, we need to consider many other factors. Take risks for example - Lexicon Pharmaceuticals has 4 warning signs (and 1 which doesn't sit too well with us) we think 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.
