Retail investors who hold 28% of Cyclopharm Limited (ASX:CYC) gained 25%, institutions profited as well

Key Insights

• Cyclopharm's significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• 50% of the business is held by the top 5 shareholders
• Insiders have bought recently

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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. We can see that retail investors own the lion's share in the company with 28% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While retail investors were the group that reaped the most benefits after last week’s 25% price gain, institutions also received a 23% cut.

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

Check out 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.

Cyclopharm already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Cyclopharm, (below). Of course, keep in mind that there are other factors to consider, too.

It would appear that 11% of Cyclopharm shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Our data shows that Anglo Australian Christian And Charitable Fund, Endowment Arm is the largest shareholder with 12% of shares outstanding. In comparison, the second and third largest shareholders hold about 11% and 10% of the stock. Furthermore, CEO James McBrayer is the owner of 4.8% of the company's shares.

Our research also brought to light the fact that roughly 50% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Cyclopharm

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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 a reasonable proportion of Cyclopharm Limited. It has a market capitalization of just AU$162m, and insiders have AU$18m worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 28% stake in the company, and hence can't easily be ignored. 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 6.0%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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 21%, 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Cyclopharm better, we need to consider many other factors. For example, we've discovered 1 warning sign for Cyclopharm that you should be aware of before investing here.

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.