Who Owns Cumberland Pharmaceuticals Inc (NASDAQ:CPIX)?
In this article, I’m going to take a look at Cumberland Pharmaceuticals Inc’s (NASDAQ:CPIX) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. When it comes to ownership structure of a company, the impact has been observed in both the long-and short-term performance of shares. Differences in ownership structure of companies can have a profound effect on how management’s incentives are aligned with shareholder returns, which is why we’ll take a moment to analyse CPIX’s shareholder registry. All data provided is as of the most recent financial year end.
See our latest analysis for Cumberland Pharmaceuticals
Institutional Ownership
With an institutional ownership of 26.68%, CPIX can face volatile stock price movements if institutions execute block trades on the open market, more so, when there are relatively small amounts of shares available on the market to trade Although CPIX has a high institutional ownership, such stock moves, in the short-term, are more commonly linked to a particular type of active institutional investors – hedge funds. Considering hedge funds hold a stake of 8.08% in the company, CPIX shares may experience high short-term volatility as this class of institutions are frequently found to sell significantly during market-wide shocks. But I also examine other ownership types and their potential impact on CPIX’s investment case.
Insider Ownership
I find insiders are another important group of stakeholders, who are directly involved in making key decisions related to the use of capital. In essence, insider ownership is more about the alignment of shareholders’ interests with the management. A major group of owners of CPIX is individual insiders, sitting with a hefty 41.33% stake in the company. Broadly, insider ownership of this level has been found to negatively affect companies with consistently low PE ratio (underperforming). And a positive impact has been seen on companies with a high PE ratio (outperforming). It may be interesting to take a look at what company insiders have been doing with their holdings lately. Insiders buying company shares can be a positive indicator of future performance, but a selling decision can simply be driven by personal financial needs.
General Public Ownership
A substantial ownership of 23.91% in CPIX is held by the general public. With this size of ownership, retail investors can collectively play a role in major company policies that affect shareholders returns, including executive remuneration and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.
What this means for you:
I suggest investors seek some degree of margin of safety due to high institutional ownership in CPIX, in particular due to the strong presence of active hedge fund investors. This is to avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. However, ownership structure should not be the only determining factor when you’re building an investment thesis for CPIX. Rather, you should be examining fundamental factors such as the intrinsic valuation, which is a key driver of Cumberland Pharmaceuticals’s share price. I urge you to complete your research by taking a look at the following:
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.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
