Avadel Pharmaceuticals plc's (NASDAQ:AVDL) institutional investors lost 7.6% last week but have benefitted from longer-term gains

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Simply Wall St

Sat, Sep 23, 2023, 7:06 AM 4 min read

If you want to know who really controls Avadel Pharmaceuticals plc (NASDAQ:AVDL), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 48% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors was the group most impacted after the company's market cap fell to US$1.0b last week. However, the 135% one-year return to shareholders may have helped lessen their pain. But they would probably be wary of future losses.

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 — NasdaqGM:AVDL Ownership Breakdown September 23rd 2023

What Does The Institutional Ownership Tell Us About Avadel Pharmaceuticals?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

Avadel Pharmaceuticals already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Avadel Pharmaceuticals' historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth — NasdaqGM:AVDL Earnings and Revenue Growth September 23rd 2023

Our data indicates that hedge funds own 14% 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. Our data shows that Janus Henderson Group plc is the largest shareholder with 11% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.6% and 6.0% of the stock.

A closer look at our ownership figures suggests that the top 12 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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 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

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 most recent data indicates that insiders own some shares in Avadel Pharmaceuticals plc. The insiders have a meaningful stake worth US$46m. Most would see this as a real positive. It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 34% stake in the company, and hence can't easily be ignored. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should be aware of the 3 warning signs we've spotted with Avadel Pharmaceuticals .

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.