Opthea Limited's (ASX:OPT) recent 14% pullback adds to one-year year losses, institutional owners may take drastic measures

Key Insights

• Given the large stake in the stock by institutions, Opthea's stock price might be vulnerable to their trading decisions
• A total of 6 investors have a majority stake in the company with 50% ownership
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

If you want to know who really controls Opthea Limited (ASX:OPT), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 38% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to AU$365m last week after a 14% drop in the share price. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 1.1% for shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the decline continues, institutional investors may be pressured to sell Opthea which might hurt individual investors.

Let's delve deeper into each type of owner of Opthea, beginning with the chart below.

See our latest analysis for Opthea

What Does The Institutional Ownership Tell Us About Opthea?

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 Opthea. 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. 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 Opthea's historic earnings and revenue below, but keep in mind there's always more to the story.

Our data indicates that hedge funds own 23% of Opthea. 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. The company's largest shareholder is Regal Partners Limited, with ownership of 23%. Meanwhile, the second and third largest shareholders, hold 14% and 4.0%, of the shares outstanding, respectively.

We did some more digging and found that 6 of the top shareholders account for roughly 50% 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Opthea

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. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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.

We can report that insiders do own shares in Opthea Limited. It has a market capitalization of just AU$365m, and insiders have AU$4.7m worth of shares, in their own names. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

With a 36% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Opthea. 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. Be aware that Opthea is showing 4 warning signs in our investment analysis , and 3 of those make us uncomfortable...

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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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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.