Could The Eli Lilly and Company (NYSE:LLY) Ownership Structure Tell Us Something Useful?

Every investor in Eli Lilly and Company (NYSE:LLY) should be aware of the most powerful shareholder groups. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of smaller companies. We also tend to see lower insider ownership in companies that were previously publicly owned.

Eli Lilly has a market capitalization of US$138b, so it’s too big to fly under the radar. We’d expect to see both institutions and retail investors owning a portion of the company. In the chart below, we can see that institutions are noticeable on the share registry. Let’s delve deeper into each type of owner, to discover more about Eli Lilly.

See our latest analysis for Eli Lilly

ownership-breakdown
NYSE:LLY Ownership Breakdown August 20th 2020

What Does The Institutional Ownership Tell Us About Eli Lilly?

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 Eli Lilly does have institutional investors; and they hold a good portion of the company’s stock. 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 Eli Lilly, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NYSE:LLY Earnings and Revenue Growth August 20th 2020

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don’t have a meaningful investment in Eli Lilly. The company’s largest shareholder is Lilly Endowment, Inc, Endowment Arm, with ownership of 12%. The Vanguard Group, Inc. is the second largest shareholder owning 7.9% of common stock, and BlackRock, Inc. holds about 6.9% of the company stock.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 12 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Eli Lilly

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.

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 information suggests that Eli Lilly and Company insiders own under 1% of the company. As it is a large company, we’d only expect insiders to own a small percentage of it. But it’s worth noting that they own US$188m worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

With a 17% ownership, the general public have some degree of sway over Eli Lilly. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we’ve spotted 1 warning sign for Eli Lilly you should know about.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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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