The big shareholder groups in La Jolla Pharmaceutical Company (NASDAQ:LJPC) have power over the company. 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.
With a market capitalization of US$118m, La Jolla Pharmaceutical is a small cap stock, so it might not be well known by many institutional investors. In the chart below, we can see that institutions own shares in the company. Let's delve deeper into each type of owner, to discover more about La Jolla Pharmaceutical.
NasdaqCM:LJPC Ownership Breakdown December 28th 2020
What Does The Institutional Ownership Tell Us About La Jolla Pharmaceutical?
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 have a fair amount of stake in La Jolla Pharmaceutical. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 La Jolla Pharmaceutical's earnings history below. Of course, the future is what really matters.
NasdaqCM:LJPC Earnings and Revenue Growth December 28th 2020
It would appear that 43% of La Jolla Pharmaceutical shares are controlled by hedge funds. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Tang Capital Management, LLC is currently the company's largest shareholder with 34% of shares outstanding. In comparison, the second and third largest shareholders hold about 8.7% and 5.3% of the stock.
On looking further, we found that 53% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.
Insider Ownership Of La Jolla Pharmaceutical
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. 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.
Shareholders would probably be interested to learn that insiders own shares in La Jolla Pharmaceutical Company. It has a market capitalization of just US$118m, and insiders have US$6.3m worth of shares, in their own names. Some would say this shows alignment of interests between shareholders and the board, though I generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.
General Public Ownership
The general public holds a 12% stake in La Jolla Pharmaceutical. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Equity Ownership
With a stake of 5.0%, private equity firms could influence the La Jolla Pharmaceutical 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.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 1 warning sign for La Jolla Pharmaceutical that you should be aware of.
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.
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