Retail investors in Cyclopharm Limited (ASX:CYC) are its biggest bettors, and their bets paid off as stock gained 19% last week

Key Insights

• Cyclopharm's significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 6 investors have a majority stake in the company with 53% ownership
• Recent purchases by insiders

To get a sense of who is truly in control of Cyclopharm Limited (ASX:CYC), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 39% to be precise, is retail investors. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, retail investors were the biggest beneficiaries of last week’s 19% gain.

In the chart below, we zoom in on the different ownership groups of Cyclopharm.

View our latest analysis for Cyclopharm

What Does The Institutional Ownership Tell Us About Cyclopharm?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors have a fair amount of stake in Cyclopharm. 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Cyclopharm's historic earnings and revenue below, but keep in mind there's always more to the story.

It would appear that 11% of Cyclopharm shares are controlled by hedge funds. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. The company's largest shareholder is Anglo Australian Christian And Charitable Fund, Endowment Arm, with ownership of 12%. Regal Partners Limited is the second largest shareholder owning 11% of common stock, and Barings Acceptance Limited holds about 11% of the company stock. In addition, we found that James McBrayer, the CEO has 4.9% of the shares allocated to their name.

We did some more digging and found that 6 of the top shareholders account for roughly 53% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Cyclopharm

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.

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.

Shareholders would probably be interested to learn that insiders own shares in Cyclopharm Limited. It has a market capitalization of just AU$175m, and insiders have AU$14m worth of shares, in their own names. This shows at least some alignment, but we usually like to see larger insider holdings. 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. 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 Equity Ownership

With a stake of 6.1%, private equity firms could influence the Cyclopharm 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.

Private Company Ownership

Our data indicates that Private Companies hold 22%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Cyclopharm has 1 warning sign we think you should be aware of.

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.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com