Given the large stake in the stock by institutions, Eli Lilly's stock price might be vulnerable to their trading decisions
The top 10 shareholders own 51% 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 Eli Lilly and Company (NYSE:LLY) can tell us which group is most powerful. With 88% 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.
Institutional investors endured the highest losses after the company's market cap fell by US$23b last week. However, the 61% one-year returns may have helped alleviate their overall losses. They should, however, be mindful of further losses in the future.
In the chart below, we zoom in on the different ownership groups of Eli Lilly.
What Does The Institutional Ownership Tell Us About Eli Lilly?
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.
Eli Lilly 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 Eli Lilly's earnings history below. Of course, the future is what really matters.
NYSE:LLY Earnings and Revenue Growth December 16th 2023
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Eli Lilly. Our data shows that Lilly Endowment, Inc, Endowment Arm is the largest shareholder with 11% of shares outstanding. The Vanguard Group, Inc. is the second largest shareholder owning 7.8% of common stock, and BlackRock, Inc. holds about 7.3% of the company stock.
We did some more digging and found that 10 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Eli Lilly
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.
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 less than 1% of Eli Lilly and Company. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$650m of stock. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
The general public, who are usually individual investors, hold a 12% stake in Eli Lilly. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
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. For example, we've discovered 2 warning signs for Eli Lilly that you should be aware of before investing here.
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.
