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Could The Avadel Pharmaceuticals plc (NASDAQ:AVDL) Ownership Structure Tell Us Something Useful?

·5-min read

A look at the shareholders of Avadel Pharmaceuticals plc (NASDAQ:AVDL) can tell us which group is most powerful. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. Companies that used to be publicly owned tend to have lower insider ownership.

Avadel Pharmaceuticals is a smaller company with a market capitalization of US$519m, so it may still be flying under the radar of many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutions own shares in the company. Let's take a closer look to see what the different types of shareholders can tell us about Avadel Pharmaceuticals.

View our latest analysis for Avadel Pharmaceuticals

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About Avadel 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.

Avadel Pharmaceuticals already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Avadel Pharmaceuticals' earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
earnings-and-revenue-growth

Our data indicates that hedge funds own 17% of Avadel 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. The company's largest shareholder is RTW Investments, LP, with ownership of 9.2%. For context, the second largest shareholder holds about 7.5% of the shares outstanding, followed by an ownership of 6.0% by the third-largest shareholder.

After doing some more digging, we found that the top 17 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

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 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 Avadel Pharmaceuticals

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Shareholders would probably be interested to learn that insiders own shares in Avadel Pharmaceuticals plc. It has a market capitalization of just US$519m, and insiders have US$6.8m worth of shares, in their own names. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public holds a 42% stake in Avadel Pharmaceuticals. 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

Private equity firms hold a 6.0% stake in Avadel Pharmaceuticals. This suggests they can be influential in key policy decisions. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Public Company Ownership

We can see that public companies hold 3.2% of the Avadel Pharmaceuticals 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Avadel Pharmaceuticals (of which 2 are potentially serious!) you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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