Wave Life Sciences Ltd.'s (NASDAQ:WVE) recent 35% pullback adds to one-year year losses, institutional owners may take drastic measures
Key Insights
Institutions' substantial holdings in Wave Life Sciences implies that they have significant influence over the company's share price
A total of 8 investors have a majority stake in the company with 52% ownership
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
Every investor in Wave Life Sciences Ltd. (NASDAQ:WVE) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 37% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
As a result, institutional investors endured the highest losses last week after market cap fell by US$150m. The recent loss, which adds to a one-year loss of 26% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell Wave Life Sciences which might hurt individual investors.
In the chart below, we zoom in on the different ownership groups of Wave Life Sciences.
Check out our latest analysis for Wave Life Sciences
What Does The Institutional Ownership Tell Us About Wave Life Sciences?
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 Wave Life Sciences does have institutional investors; and they hold a good portion of the company's 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Wave Life Sciences, (below). Of course, keep in mind that there are other factors to consider, too.
It looks like hedge funds own 11% of Wave Life Sciences shares. 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. The company's largest shareholder is RA Capital Management, L.P., with ownership of 14%. In comparison, the second and third largest shareholders hold about 9.0% and 5.9% of the stock.
On further inspection, we found that more than half the company's shares are owned by the top 8 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Wave Life Sciences
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 data suggests that insiders own under 1% of Wave Life Sciences Ltd. in their own names. It seems the board members have no more than US$5.0m worth of shares in the US$531m company. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public, who are usually individual investors, hold a 23% stake in Wave Life Sciences. 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.
Private Equity Ownership
Private equity firms hold a 14% stake in Wave Life Sciences. This suggests they can be influential in key policy decisions. 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
It appears to us that public companies own 14% of Wave Life Sciences. 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:
It's always worth thinking about the different groups who own shares in a company. But to understand Wave Life Sciences better, we need to consider many other factors. For example, we've discovered 5 warning signs for Wave Life Sciences (2 shouldn't be ignored!) that you should be aware of before investing here.
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.
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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.
