Institutions' substantial holdings in Verona Pharma implies that they have significant influence over the company's share price
The top 9 shareholders own 52% 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 Verona Pharma plc (NASDAQ:VRNA) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 57% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$1.4b last week after a 11% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 25% might not go down well especially with this category of shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in Verona Pharma's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.
In the chart below, we zoom in on the different ownership groups of Verona Pharma.
NasdaqGM:VRNA Ownership Breakdown January 15th 2024
What Does The Institutional Ownership Tell Us About Verona Pharma?
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 Verona 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 Verona Pharma, (below). Of course, keep in mind that there are other factors to consider, too.
NasdaqGM:VRNA Earnings and Revenue Growth January 15th 2024
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in Verona Pharma. The company's largest shareholder is FMR LLC, with ownership of 8.7%. With 7.9% and 7.0% of the shares outstanding respectively, RA Capital Management, L.P. and New Enterprise Associates, Inc. are the second and third largest shareholders. Additionally, the company's CEO David Zaccardelli directly holds 1.8% of the total shares outstanding.
We did some more digging and found that 9 of the top shareholders account for roughly 52% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Verona Pharma
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.
Our most recent data indicates that insiders own some shares in Verona Pharma plc. The insiders have a meaningful stake worth US$61m. Most would see this as a real positive. Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.
General Public Ownership
The general public-- including retail investors -- own 13% stake in the company, and hence can't easily be ignored. 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 Equity Ownership
With a stake of 25%, private equity firms could influence the Verona Pharma board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.
Next Steps:
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Verona Pharma (1 is significant!) that you should be aware of before investing here.
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.
