Could Ardelyx, Inc.’s (NASDAQ:ARDX) Investor Composition Influence The Stock Price?

A look at the shareholders of Ardelyx, Inc. (NASDAQ:ARDX) can tell us which group is most powerful. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of smaller companies. Companies that used to be publicly owned tend to have lower insider ownership.

With a market capitalization of US$326m, Ardelyx is a small cap stock, so it might not be well known by many institutional investors. Taking a look at our data on the ownership groups (below), it’s seems that institutional investors have bought into the company. Let’s delve deeper into each type of owner, to discover more about ARDX.

View our latest analysis for Ardelyx

NasdaqGM:ARDX Ownership Summary, September 25th 2019
NasdaqGM:ARDX Ownership Summary, September 25th 2019

What Does The Institutional Ownership Tell Us About Ardelyx?

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.

We can see that Ardelyx does have institutional investors; and they hold 40% of the stock. 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. 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 Ardelyx’s earnings history, below. Of course, the future is what really matters.

NasdaqGM:ARDX Income Statement, September 25th 2019
NasdaqGM:ARDX Income Statement, September 25th 2019

It looks like hedge funds own 12% of Ardelyx 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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Ardelyx

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.

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 Ardelyx, Inc.. In their own names, insiders own US$5.9m worth of stock in the US$326m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 22% ownership, the general public have some degree of sway over ARDX. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Equity Ownership

With an ownership of 24%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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:

It’s always worth thinking about the different groups who own shares in a company. But to understand Ardelyx better, we need to consider many other factors.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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. Thank you for reading.