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Every investor in Verastem, Inc. (NASDAQ:VSTM) should be aware of the most powerful shareholder groups. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. Companies that used to be publicly owned tend to have lower insider ownership.
Verastem is a smaller company with a market capitalization of US$231m, so it may still be flying under the radar of many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutions are noticeable on the share registry. Let's delve deeper into each type of owner, to discover more about Verastem.
What Does The Institutional Ownership Tell Us About Verastem?
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.
Verastem already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Verastem's historic earnings and revenue below, but keep in mind there's always more to the story.
Verastem is not owned by hedge funds. Our data shows that BlackRock, Inc. is the largest shareholder with 6.5% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.9% and 5.4%, of the shares outstanding, respectively.
A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where 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 Verastem
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
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 information suggests that Verastem, Inc. insiders own under 1% of the company. However, it's possible that insiders might have an indirect interest through a more complex structure. It appears that the board holds about US$933k worth of stock. This compares to a market capitalization of US$231m. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.
General Public Ownership
With a 49% ownership, the general public have some degree of sway over Verastem. 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 an ownership of 5.4%, 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.
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. For instance, we've identified 4 warning signs for Verastem (2 are a bit unpleasant) that you should be aware of.
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.
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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