Reneo Pharmaceuticals, Inc.'s (NASDAQ:RPHM) stock price dropped 10% last week; private equity firms would not be happy
Key Insights
Reneo Pharmaceuticals' significant private equity firms ownership suggests that the key decisions are influenced by shareholders from the larger public
52% of the business is held by the top 7 shareholders
A look at the shareholders of Reneo Pharmaceuticals, Inc. (NASDAQ:RPHM) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are private equity firms with 46% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
As market cap fell to US$223m last week, private equity firms would have faced the highest losses than any other shareholder groups of the company.
Let's delve deeper into each type of owner of Reneo Pharmaceuticals, beginning with the chart below.
See our latest analysis for Reneo Pharmaceuticals
What Does The Institutional Ownership Tell Us About Reneo Pharmaceuticals?
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.
Reneo Pharmaceuticals already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Reneo Pharmaceuticals, (below). Of course, keep in mind that there are other factors to consider, too.
Hedge funds don't have many shares in Reneo Pharmaceuticals. Our data shows that New Enterprise Associates, Inc. is the largest shareholder with 14% of shares outstanding. For context, the second largest shareholder holds about 9.9% of the shares outstanding, followed by an ownership of 8.0% by the third-largest shareholder.
We did some more digging and found that 7 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.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Reneo 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.
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.
We can report that insiders do own shares in Reneo Pharmaceuticals, Inc.. As individuals, the insiders collectively own US$3.8m worth of the US$223m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public-- including retail investors -- own 39% stake in the company, and hence can't easily be ignored. 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 46%, private equity firms could influence the Reneo Pharmaceuticals board. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.
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 instance, we've identified 4 warning signs for Reneo Pharmaceuticals (1 is potentially serious) that you should be aware of.
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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.
