After losing 5.2% in the past year, Xenon Pharmaceuticals Inc. (NASDAQ:XENE) institutional owners must be relieved by the recent gain
Key Insights
Significantly high institutional ownership implies Xenon Pharmaceuticals' stock price is sensitive to their trading actions
A total of 15 investors have a majority stake in the company with 51% ownership
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
If you want to know who really controls Xenon Pharmaceuticals Inc. (NASDAQ:XENE), then you'll have to look at the makeup of its share registry. With 78% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
Last week's US$487m market cap gain would probably be appreciated by institutional investors, especially after a year of 5.2% losses.
Let's delve deeper into each type of owner of Xenon Pharmaceuticals, beginning with the chart below.
Check out our latest analysis for Xenon Pharmaceuticals
What Does The Institutional Ownership Tell Us About Xenon 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.
As you can see, institutional investors have a fair amount of stake in Xenon Pharmaceuticals. 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 Xenon Pharmaceuticals, (below). Of course, keep in mind that there are other factors to consider, too.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Our data indicates that hedge funds own 6.6% of Xenon Pharmaceuticals. 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 Avoro Capital Advisors LLC, with ownership of 6.6%. Capital Research and Management Company is the second largest shareholder owning 6.4% of common stock, and Driehaus Capital Management LLC holds about 6.1% of the company stock.
A closer look at our ownership figures suggests that the top 15 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of Xenon 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.
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 most recent data indicates that insiders own less than 1% of Xenon Pharmaceuticals Inc.. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own US$8.4m worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.
General Public Ownership
With a 15% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Xenon Pharmaceuticals. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Xenon Pharmaceuticals better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Xenon Pharmaceuticals (at least 1 which can't be ignored) , and understanding them should be part of your investment process.
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.
