Institutional investors may overlook Photocure ASA's (OB:PHO) recent kr374m market cap drop as long-term gains remain positive

By
Simply Wall St
Published
November 22, 2021
OB:PHO
Source: Shutterstock

A look at the shareholders of Photocure ASA (OB:PHO) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 62% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Institutional investors was the group most impacted after the company's market cap fell to kr2.9b last week. However, the 34% one-year return to shareholders might have softened the blow. But they would probably be wary of future losses.

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

Check out our latest analysis for Photocure

ownership-breakdown
OB:PHO Ownership Breakdown November 23rd 2021

What Does The Institutional Ownership Tell Us About Photocure?

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 Photocure does have institutional investors; and they hold a good portion of the company's stock. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Photocure's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
OB:PHO Earnings and Revenue Growth November 23rd 2021

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. It would appear that 5.3% of Photocure 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. The company's largest shareholder is Morgan Stanley, Investment Banking and Brokerage Investments, with ownership of 10%. With 5.3% and 3.2% of the shares outstanding respectively, Briarwood Chase Management LLC and Nordnet AB (publ), Asset Management Arm are the second and third largest shareholders.

A closer look at our ownership figures suggests that the top 17 shareholders have a combined ownership of 52% implying that no single shareholder has a majority.

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 Photocure

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

We can see that insiders own shares in Photocure ASA. It has a market capitalization of just kr2.9b, and insiders have kr80m worth of shares, in their own names. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 28% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Photocure. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Photocure better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Photocure , and understanding them should be part of your investment process.

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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