Institutions' substantial holdings in Allakos implies that they have significant influence over the company's share price
The top 8 shareholders own 53% of the company
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
A look at the shareholders of Allakos Inc. (NASDAQ:ALLK) can tell us which group is most powerful. With 55% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.
Let's delve deeper into each type of owner of Allakos, beginning with the chart below.
What Does The Institutional Ownership Tell Us About Allakos?
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 Allakos does have institutional investors; and they hold a good portion of the company's stock. 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Allakos' historic earnings and revenue below, but keep in mind there's always more to the story.
NasdaqGS:ALLK Earnings and Revenue Growth May 3rd 2024
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 19% of Allakos 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. The company's largest shareholder is BVF Partners L.P., with ownership of 19%. Meanwhile, the second and third largest shareholders, hold 6.9% and 5.8%, of the shares outstanding, respectively. In addition, we found that Robert Alexander, the CEO has 0.7% of the shares allocated to their name.
We did some more digging and found that 8 of the top shareholders account for roughly 53% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.
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 Allakos
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
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.
Our most recent data indicates that insiders own some shares in Allakos Inc.. In their own names, insiders own US$2.0m worth of stock in the US$100m company. Some would say this shows alignment of interests between shareholders and the board, though we generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.
General Public Ownership
The general public-- including retail investors -- own 11% stake in the company, and hence can't 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.
Private Equity Ownership
With an ownership of 13%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Allakos (of which 1 is potentially serious!) you should know about.
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.
