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Can We See Significant Institutional Ownership On The Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM) Share Register?

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If you want to know who really controls Rhythm Pharmaceuticals, Inc. (NASDAQ:RYTM), then you'll have to look at the makeup of its share registry. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Companies that have been privatized tend to have low insider ownership.

Rhythm Pharmaceuticals isn't enormous, but it's not particularly small either. It has a market capitalization of US$1.0b, which means it would generally expect to see some institutions on the share registry. Taking a look at our data on the ownership groups (below), it's seems that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about RYTM.

Check out our latest analysis for Rhythm Pharmaceuticals

NasdaqGM:RYTM Ownership Summary, October 23rd 2019
NasdaqGM:RYTM Ownership Summary, October 23rd 2019

What Does The Institutional Ownership Tell Us About Rhythm Pharmaceuticals?

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.

We can see that Rhythm Pharmaceuticals does have institutional investors; and they hold 52% of the stock. 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. 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 Rhythm Pharmaceuticals's earnings history, below. Of course, the future is what really matters.

NasdaqGM:RYTM Income Statement, October 23rd 2019
NasdaqGM:RYTM Income Statement, October 23rd 2019

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. It would appear that 6.4% of Rhythm Pharmaceuticals shares are controlled by hedge funds. 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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Rhythm 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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our most recent data indicates that insiders own some shares in Rhythm Pharmaceuticals, Inc.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around US$24m worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 18% ownership, the general public have some degree of sway over RYTM. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Equity Ownership

With a stake of 19%, private equity firms could influence the RYTM board. 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.

Public Company Ownership

We can see that public companies hold 3.3%, of the RYTM shares on issue. It's hard to say for sure, but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.