What Percentage Of Open Orphan plc (LON:ORPH) Shares Do Insiders Own?

By
Simply Wall St
Published
January 12, 2022
AIM:ORPH
Source: Shutterstock

The big shareholder groups in Open Orphan plc (LON:ORPH) have power over the company. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

Open Orphan is not a large company by global standards. It has a market capitalization of UK£135m, which means it wouldn't have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutions are noticeable on the share registry. We can zoom in on the different ownership groups, to learn more about Open Orphan.

See our latest analysis for Open Orphan

ownership-breakdown
AIM:ORPH Ownership Breakdown January 12th 2022

What Does The Institutional Ownership Tell Us About Open Orphan?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that Open Orphan 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 Open Orphan's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
AIM:ORPH Earnings and Revenue Growth January 12th 2022

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Open Orphan is not owned by hedge funds. The company's largest shareholder is HBOS Investment Fund Managers Limited, with ownership of 6.2%. With 5.4% and 5.1% of the shares outstanding respectively, Davy Asset Management Limited and A J Bell Holdings Limited, Asset Management Arm are the second and third largest shareholders.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 19 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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

Insider Ownership Of Open Orphan

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. 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.

Shareholders would probably be interested to learn that insiders own shares in Open Orphan plc. It has a market capitalization of just UK£135m, and insiders have UK£6.8m 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 35% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Open Orphan better, we need to consider many other factors.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

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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