In the wake of PureTech Health plc's (LON:PRTC) latest UK£49m market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Institutions' substantial holdings in PureTech Health implies that they have significant influence over the company's share price
• The top 11 shareholders own 51% of the company
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

Our free stock report includes 4 warning signs investors should be aware of before investing in PureTech Health. Read for free now.

To get a sense of who is truly in control of PureTech Health plc (LON:PRTC), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 73% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And so it follows that institutional investors was the group most impacted after the company's market cap fell to UK£283m last week after a 15% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 45% might not go down well especially with this category of shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the downtrend continues, institutions may face pressures to sell PureTech Health, which might have negative implications on individual investors.

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

View our latest analysis for PureTech Health

What Does The Institutional Ownership Tell Us About PureTech Health?

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

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. It would appear that 5.4% of PureTech Health 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. Looking at our data, we can see that the largest shareholder is Invesco Ltd. with 17% of shares outstanding. For context, the second largest shareholder holds about 5.8% of the shares outstanding, followed by an ownership of 5.4% by the third-largest shareholder.

A closer look at our ownership figures suggests that the top 11 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

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 PureTech Health

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 most recent data indicates that insiders own some shares in PureTech Health plc. It has a market capitalization of just UK£283m, and insiders have UK£19m 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

The general public-- including retail investors -- own 11% 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.

Public Company Ownership

It appears to us that public companies own 4.0% of PureTech Health. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand PureTech Health better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for PureTech Health (of which 2 are a bit unpleasant!) you should know about.

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.