Every investor in PLx Pharma Inc (NASDAQ:PLXP) should be aware of the most powerful shareholder groups. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. 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.
PLx Pharma is a smaller company with a market capitalization of US$35.4m, so it may still be flying under the radar of many institutional investors. Taking a look at the our data on the ownership groups (below), it’s seems that institutions own shares in the company. Let’s delve deeper into each type of owner, to discover more about PLXP.
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What Does The Institutional Ownership Tell Us About PLx Pharma?
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.
As you can see, institutional investors own 11.1% of PLx Pharma. 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 PLx Pharma, (below). Of course, keep in mind that there are other factors to consider, too.
It looks like hedge funds own 12.3% of PLx Pharma shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.
Insider Ownership Of PLx Pharma
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.