RedHill Biopharma Ltd.'s (NASDAQ:RDHL) market cap dropped US$146m last week; Individual investors bore the brunt
The considerable ownership by individual investors in RedHill Biopharma indicates that they collectively have a greater say in management and business strategy
50% of the business is held by the top 14 shareholders
Using data from company's past performance alongside ownership research, one can better assess the future performance of a company
To get a sense of who is truly in control of RedHill Biopharma Ltd. (NASDAQ:RDHL), it is important to understand the ownership structure of the business. With 49% stake, individual investors possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).
And last week, individual investors endured the biggest losses as the stock fell by 22%.
Let's delve deeper into each type of owner of RedHill Biopharma, beginning with the chart below.
View our latest analysis for RedHill Biopharma
What Does The Institutional Ownership Tell Us About RedHill Biopharma?
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.
As you can see, institutional investors have a fair amount of stake in RedHill Biopharma. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 RedHill Biopharma, (below). Of course, keep in mind that there are other factors to consider, too.
It would appear that 32% of RedHill Biopharma 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. Empery Asset Management, LP is currently the largest shareholder, with 23% of shares outstanding. In comparison, the second and third largest shareholders hold about 8.2% and 7.6% of the stock.
Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 14 shareholders, meaning that no single shareholder has a majority interest in the ownership.
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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.
Insider Ownership Of RedHill Biopharma
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.
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.
We can report that insiders do own shares in RedHill Biopharma Ltd.. It has a market capitalization of just US$510m, and insiders have US$11m worth of shares, in their own names. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.
General Public Ownership
With a 49% ownership, the general public, mostly comprising of individual investors, have some degree of sway over RedHill Biopharma. 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 Company Ownership
We can see that Private Companies own 4.3%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
Public Company Ownership
Public companies currently own 7.6% of RedHill Biopharma stock. 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.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 5 warning signs for RedHill Biopharma (3 can't be ignored) that you should be aware of.
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.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here