Institutional investors in Wave Life Sciences Ltd. (NASDAQ:WVE) see US$94m decrease in market cap last week, although long-term gains have benefitted them.
Significantly high institutional ownership implies Wave Life Sciences' stock price is sensitive to their trading actions
The top 9 shareholders own 51% of the company
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
A look at the shareholders of Wave Life Sciences Ltd. (NASDAQ:WVE) can tell us which group is most powerful. The group holding the most number of shares in the company, around 47% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 4.3% in value last week. However, the 145% one-year return to shareholders may have helped lessen their pain. But they would probably be wary of future losses.
Let's delve deeper into each type of owner of Wave Life Sciences, beginning with the chart below.
NasdaqGM:WVE Ownership Breakdown November 3rd 2024
What Does The Institutional Ownership Tell Us About Wave Life Sciences?
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.
We can see that Wave Life Sciences 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. 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 Wave Life Sciences' earnings history below. Of course, the future is what really matters.
NasdaqGM:WVE Earnings and Revenue Growth November 3rd 2024
It would appear that 5.0% of Wave Life Sciences shares are controlled by hedge funds. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. RA Capital Management, L.P. is currently the largest shareholder, with 12% of shares outstanding. With 11% and 5.0% of the shares outstanding respectively, GSK plc and Maverick Capital, Ltd. are the second and third largest shareholders.
On further inspection, we found that more than half the company's shares are owned by the top 9 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Wave Life Sciences
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
Our information suggests that Wave Life Sciences Ltd. insiders own under 1% of the company. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own US$16m worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.
General Public Ownership
The general public-- including retail investors -- own 21% 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 a stake of 12%, private equity firms could influence the Wave Life Sciences board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.
Public Company Ownership
We can see that public companies hold 15% of the Wave Life Sciences shares on issue. 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 Wave Life Sciences better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Wave Life Sciences (of which 2 can't be ignored!) 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.
