If you want to know who really controls Arena Pharmaceuticals, Inc. (NASDAQ:ARNA), then you'll have to look at the makeup of its share registry. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. We also tend to see lower insider ownership in companies that were previously publicly owned.
Arena Pharmaceuticals is a pretty big company. It has a market capitalization of US$3.7b. Normally institutions would own a significant portion of a company this size. In the chart below, we can see that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about Arena Pharmaceuticals.
What Does The Institutional Ownership Tell Us About Arena 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 Arena Pharmaceuticals does have institutional investors; and they hold a good portion of the company's stock. 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 Arena Pharmaceuticals' earnings history below. Of course, the future is what really matters.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Our data indicates that hedge funds own 6.9% of Arena Pharmaceuticals. 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 Wellington Management Group LLP with 10% of shares outstanding. The second and third largest shareholders are The Vanguard Group, Inc. and BlackRock, Inc., with an equal amount of shares to their name at 9.2%.
A closer look at our ownership figures suggests that the top 11 shareholders have a combined ownership of 51% implying that 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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Arena 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 less than 1% of Arena Pharmaceuticals, Inc.. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own US$8.0m worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.
General Public Ownership
The general public, with a 10% 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.
It's always worth thinking about the different groups who own shares in a company. But to understand Arena Pharmaceuticals better, we need to consider many other factors. For instance, we've identified 4 warning signs for Arena Pharmaceuticals (1 can't be ignored) that you should be aware of.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.
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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