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A look at the shareholders of Clinuvel Pharmaceuticals Limited (ASX:CUV) can tell us which group is most powerful. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.
Clinuvel Pharmaceuticals has a market capitalization of AU$1.2b, so we would expect some institutional investors to have noticed the stock. Taking a look at our data on the ownership groups (below), it's seems that institutional investors have bought into the company. Let's take a closer look to see what the different types of shareholder can tell us about Clinuvel Pharmaceuticals.
What Does The Institutional Ownership Tell Us About Clinuvel 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.
As you can see, institutional investors have a fair amount of stake in Clinuvel Pharmaceuticals. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Clinuvel Pharmaceuticals, (below). Of course, keep in mind that there are other factors to consider, too.
ASX:CUV Earnings and Revenue Growth July 14th 2020
Hedge funds don't have many shares in Clinuvel Pharmaceuticals. BNY Mellon Asset Management is currently the company's largest shareholder with 9.7% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.1% and 5.2%, of the shares outstanding, respectively. Philippe Wolgen, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.
Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.
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 is some analyst coverage of the stock, but it could still become more well known, with time.
Insider Ownership Of Clinuvel 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.
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.
It seems insiders own a significant proportion of Clinuvel Pharmaceuticals Limited. Insiders own AU$174m worth of shares in the AU$1.2b company. I would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public, who are mostly retail investors, collectively hold 54% of Clinuvel Pharmaceuticals shares. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.
Private Company Ownership
It seems that Private Companies own 9.6%, of the CUV stock. 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.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Clinuvel Pharmaceuticals better, we need to consider many other factors.
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.
This article by Simply Wall St is general in nature. 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.
