Could The Ardelyx, Inc. (NASDAQ:ARDX) Ownership Structure Tell Us Something Useful?

The big shareholder groups in Ardelyx, Inc. (NASDAQ:ARDX) have power over the company. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Companies that have been privatized tend to have low insider ownership.

Ardelyx is not a large company by global standards. It has a market capitalization of US$669m, which means it wouldn’t have the attention of many institutional investors. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about Ardelyx.

Check out our latest analysis for Ardelyx

NasdaqGM:ARDX Ownership Summary May 28th 2020
NasdaqGM:ARDX Ownership Summary May 28th 2020

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.

As you can see, institutional investors own 50% of Ardelyx. 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 Ardelyx, (below). Of course, keep in mind that there are other factors to consider, too.

NasdaqGM:ARDX Income Statement May 28th 2020
NasdaqGM:ARDX Income Statement May 28th 2020

It looks like hedge funds own 11% 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. The company’s largest shareholder is New Enterprise Associates, Inc., with ownership of 18%, The second largest shareholder with 7.2%, is RA Capital Management, L.P., followed by Adage Capital Management, L.P., with an ownership of 5.9%.

On further inspection, we found that 51% of the share register is owned by the top 7 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Ardelyx

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board; and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board, themselves.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our most recent data indicates that insiders own some shares in Ardelyx, Inc.. It has a market capitalization of just US$669m, and insiders have US$7.2m worth of shares, in their own names. 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 12% 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 a stake of 25%, private equity firms could influence the ARDX 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. To that end, you should be aware of the 2 warning signs we’ve spotted with Ardelyx .

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.

Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email 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. 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. Thank you for reading.