A look at the shareholders of Reata Pharmaceuticals, Inc. (NASDAQ:RETA) can tell us which group is most powerful. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. I quite like to see at least a little bit of insider ownership. As Charlie Munger said ‘Show me the incentive and I will show you the outcome.
Reata Pharmaceuticals is a pretty big company. It has a market capitalization of US$7.1b. Normally institutions would own a significant portion of a company this size. Taking a look at our data on the ownership groups (below), it’s seems that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about Reata Pharmaceuticals.
See our latest analysis for Reata Pharmaceuticals
What Does The Institutional Ownership Tell Us About Reata 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.
Reata Pharmaceuticals already has institutions on the share registry. Indeed, they own 62% of the company. 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. 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 Reata Pharmaceuticals, (below). Of course, keep in mind that there are other factors to consider, too.
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don’t have many shares in Reata Pharmaceuticals. Looking at our data, we can see that the largest shareholder is CPMG, Inc. with 15% of shares outstanding. The second largest shareholder with 9.7%, is William Rose, followed by Evelyn Potter Rose Survivor’s Trust, with an ownership of 8.4%.
On studying the facts and figures more closely, we found that 7 of the top shareholders account for 51% 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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Reata Pharmaceuticals
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.
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.
Our most recent data indicates that insiders own a reasonable proportion of Reata Pharmaceuticals, Inc.. It is very interesting to see that insiders have a meaningful US$1.1b stake in this US$7.1b business. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.
General Public Ownership
The general public holds a 14% stake in RETA. 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 Company Ownership
It seems that Private Companies own 8.7%, of the RETA stock. It’s hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.
Next Steps:
It’s always worth thinking about the different groups who own shares in a company. But to understand Reata Pharmaceuticals better, we need to consider many other factors.
For example, we’ve discovered 3 warning signs for Reata Pharmaceuticals which any shareholder or potential investor 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.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
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