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A look at the shareholders of Prometheus Biosciences, Inc. (NASDAQ:RXDX) can tell us which group is most powerful. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. Companies that used to be publicly owned tend to have lower insider ownership.
With a market capitalization of US$833m, Prometheus Biosciences is a decent size, so it is probably on the radar of institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about Prometheus Biosciences.
What Does The Institutional Ownership Tell Us About Prometheus Biosciences?
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.
Prometheus Biosciences 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 Prometheus Biosciences, (below). Of course, keep in mind that there are other factors to consider, too.
Our data indicates that hedge funds own 21% of Prometheus Biosciences. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Looking at our data, we can see that the largest shareholder is Cedars-Sinai Health System with 13% of shares outstanding. Eventide Asset Management, LLC is the second largest shareholder owning 9.6% of common stock, and Perceptive Advisors LLC holds about 8.5% of the company stock.
On further inspection, we found that more than half the company's shares are owned by the top 6 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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Prometheus Biosciences
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 less than 1% of Prometheus Biosciences, Inc.. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It appears that the board holds about US$3.4m worth of stock. This compares to a market capitalization of US$833m. I generally like to see a board more invested. However it might be worth checking if those insiders have been buying.
General Public Ownership
The general public holds a 24% stake in Prometheus Biosciences. 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 16%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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.
Private Company Ownership
We can see that Private Companies own 13%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.
It's always worth thinking about the different groups who own shares in a company. But to understand Prometheus Biosciences better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Prometheus Biosciences (of which 1 is concerning!) you should know about.
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.
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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