Positive week for Reata Pharmaceuticals, Inc. (NASDAQ:RETA) institutional investors who lost 76% over the past year
If you want to know who really controls Reata Pharmaceuticals, Inc. (NASDAQ:RETA), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 70% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).
Institutional investors would probably welcome last week's 13% increase in share prices after a year of 76% losses as a sign that returns are likely to begin trending higher.
Let's take a closer look to see what the different types of shareholders can tell us about Reata Pharmaceuticals.
See our latest analysis for Reata Pharmaceuticals
What Does The Institutional Ownership Tell Us About Reata Pharmaceuticals?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
As you can see, institutional investors have a fair amount of stake in Reata 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Reata Pharmaceuticals' earnings history below. Of course, the future is what really matters.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. It would appear that 5.4% of Reata Pharmaceuticals shares are controlled by hedge funds. 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. CPMG, Inc. is currently the company's largest shareholder with 12% of shares outstanding. William Rose is the second largest shareholder owning 9.0% of common stock, and The Vanguard Group, Inc. holds about 7.2% of the company stock. Additionally, the company's CEO J. Huff directly holds 1.8% of the total shares outstanding.
We also observed that the top 8 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. 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 Reata Pharmaceuticals
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
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 a reasonable proportion of Reata Pharmaceuticals, Inc.. Insiders own US$118m worth of shares in the US$967m company. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public-- including retail investors -- own 13% stake in the company, and hence can't 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.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Reata Pharmaceuticals better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Reata Pharmaceuticals (of which 1 is significant!) you should know about.
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.
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.
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