Given the large stake in the stock by institutions, ADC Therapeutics' stock price might be vulnerable to their trading decisions
The top 7 shareholders own 51% of the company
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
If you want to know who really controls ADC Therapeutics SA (NYSE:ADCT), 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 32% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
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. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.
Let's take a closer look to see what the different types of shareholders can tell us about ADC Therapeutics.
What Does The Institutional Ownership Tell Us About ADC Therapeutics?
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.
We can see that ADC Therapeutics does have institutional investors; and they hold a good portion of the company's stock. 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. 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 ADC Therapeutics' historic earnings and revenue below, but keep in mind there's always more to the story.
NYSE:ADCT Earnings and Revenue Growth October 28th 2024
Our data indicates that hedge funds own 27% of ADC Therapeutics. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Redmile Group, LLC is currently the company's largest shareholder with 17% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 9.9% and 7.7%, of the shares outstanding, respectively. Additionally, the company's CEO Ameet Mallik directly holds 1.0% of the total shares outstanding.
On further inspection, we found that more than half the company's shares are owned by the top 7 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of ADC Therapeutics
The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.
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.
We can report that insiders do own shares in ADC Therapeutics SA. As individuals, the insiders collectively own US$17m worth of the US$285m company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.
General Public Ownership
With a 21% ownership, the general public, mostly comprising of individual investors, have some degree of sway over ADC Therapeutics. 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
Our data indicates that Private Companies hold 10%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.
Public Company Ownership
It appears to us that public companies own 4.1% of ADC Therapeutics. 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:
It's always worth thinking about the different groups who own shares in a company. But to understand ADC Therapeutics better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with ADC Therapeutics (at least 1 which can't be ignored) , and understanding them should be part of your investment process.
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.
