The big shareholder groups in Avid Bioservices, Inc. (NASDAQ:CDMO) have power over the company. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.
Avid Bioservices is a smaller company with a market capitalization of US$407m, so it may still be flying under the radar of many institutional investors. In the chart below, we can see that institutional investors have bought into the company. Let's delve deeper into each type of owner, to discover more about Avid Bioservices.
What Does The Institutional Ownership Tell Us About Avid Bioservices?
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 Avid Bioservices 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 Avid Bioservices's historic earnings and revenue, below, but keep in mind there's always more to the story.
Our data indicates that hedge funds own 17% of Avid Bioservices. 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. Looking at our data, we can see that the largest shareholder is Iszo Capital Management LP with 10.0% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.3% and 6.9%, of the shares outstanding, respectively.
After doing some more digging, we found that the top 12 have the combined ownership of 51% in the company, suggesting that no one share holder has significant control over the company.
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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Avid Bioservices
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
Shareholders would probably be interested to learn that insiders own shares in Avid Bioservices, Inc.. In their own names, insiders own US$30m worth of stock in the US$407m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.
General Public Ownership
The general public, with a 34% stake in the company, will not easily be ignored. 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.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 1 warning sign for Avid Bioservices that you should be aware of before investing here.
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email email@example.com.