H. Lundbeck A/S' (CPH:HLUN B) stock price dropped 3.5% last week; private equity firms would not be happy

Key Insights

• H. Lundbeck's significant private equity firms ownership suggests that the key decisions are influenced by shareholders from the larger public
• Lundbeckfonden BioCapital owns 69% of the company
• Institutional ownership in H. Lundbeck is 10%

Every investor in H. Lundbeck A/S (CPH:HLUN B) should be aware of the most powerful shareholder groups. We can see that private equity firms own the lion's share in the company with 69% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As market cap fell to kr.40b last week, private equity firms would have faced the highest losses than any other shareholder groups of the company.

Let's take a closer look to see what the different types of shareholders can tell us about H. Lundbeck.

Check out our latest analysis for H. Lundbeck

What Does The Institutional Ownership Tell Us About H. Lundbeck?

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 H. Lundbeck does have institutional investors; and they hold a good portion of the company's stock. 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 H. Lundbeck's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in H. Lundbeck. Lundbeckfonden BioCapital is currently the company's largest shareholder with 69% of shares outstanding. With such a huge stake in the ownership, we infer that they have significant control of the future of the company. With 1.4% and 1.2% of the shares outstanding respectively, Handelsbanken Asset Management and The Vanguard Group, Inc. are the second and third largest shareholders.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. 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 H. Lundbeck

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our information suggests that H. Lundbeck A/S insiders own under 1% of the company. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own kr.40m 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 21% ownership, the general public, mostly comprising of individual investors, have some degree of sway over H. Lundbeck. 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 an ownership of 69%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

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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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.