Institutional owners may take dramatic actions as Allakos Inc.'s (NASDAQ:ALLK) recent 11% drop adds to one-year losses

Key Insights

• Given the large stake in the stock by institutions, Allakos' stock price might be vulnerable to their trading decisions
• A total of 8 investors have a majority stake in the company with 51% ownership
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

Every investor in Allakos Inc. (NASDAQ:ALLK) should be aware of the most powerful shareholder groups. We can see that institutions own the lion's share in the company with 51% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors saw their holdings value drop by 11% last week. The recent loss, which adds to a one-year loss of 59% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell Allakos which might hurt individual investors.

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

See our latest analysis for Allakos

What Does The Institutional Ownership Tell Us About Allakos?

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

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. It looks like hedge funds own 19% of Allakos shares. 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. Our data shows that BVF Partners L.P. is the largest shareholder with 19% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 6.9% and 6.0%, of the shares outstanding, respectively. Furthermore, CEO Robert Alexander is the owner of 0.8% of the company's shares.

We also observed that the top 8 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Allakos

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.

Shareholders would probably be interested to learn that insiders own shares in Allakos Inc.. In their own names, insiders own US$2.5m worth of stock in the US$111m company. It is good to see some investment by insiders, but we usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 16% stake in the company, and hence can't easily be ignored. 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.

Private Equity Ownership

With a stake of 12%, private equity firms could influence the Allakos board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

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 Allakos is showing 5 warning signs in our investment analysis , and 3 of those are significant...

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.