- United States
Private equity firms invested in Aravive, Inc. (NASDAQ:ARAV) copped the brunt of last week's US$15m market cap decline
- Aravive's significant private equity firms ownership suggests that the key decisions are influenced by shareholders from the larger public
- The top 2 shareholders own 51% of the company
- Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
A look at the shareholders of Aravive, Inc. (NASDAQ:ARAV) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are private equity firms with 50% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
As market cap fell to US$104m last week, private equity firms would have faced the highest losses than any other shareholder groups of the company.
In the chart below, we zoom in on the different ownership groups of Aravive.
Check out our latest analysis for Aravive
What Does The Institutional Ownership Tell Us About Aravive?
Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.
Institutions have a very small stake in Aravive. That indicates that the company is on the radar of some funds, but it isn't particularly popular with professional investors at the moment. So if the company itself can improve over time, we may well see more institutional buyers in the future. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.
It looks like hedge funds own 13% of Aravive shares. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Eshelman Ventures, LLC is currently the company's largest shareholder with 43% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 8.0% and 7.6%, of the shares outstanding, respectively.
To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.
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 are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Aravive
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 Aravive, Inc.. It has a market capitalization of just US$104m, and insiders have US$6.8m worth of shares, in their own names. Some would say this shows alignment of interests between shareholders and the board, though we generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.
General Public Ownership
With a 25% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Aravive. 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 50%, private equity firms could influence the Aravive board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should learn about the 3 warning signs we've spotted with Aravive (including 1 which shouldn't be ignored) .
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.
Aravive, Inc., a clinical-stage biopharmaceutical company, develops transformative treatments for life-threatening diseases, including cancer and fibrosis in the United States.
Adequate balance sheet and slightly overvalued.