Institutional investors control 61% of Ardelyx, Inc. (NASDAQ:ARDX) and were rewarded last week after stock increased 12%

Key Insights

• Significantly high institutional ownership implies Ardelyx's stock price is sensitive to their trading actions
• A total of 22 investors have a majority stake in the company with 50% ownership
• Recent sales by insiders

A look at the shareholders of Ardelyx, Inc. (NASDAQ:ARDX) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 61% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And things are looking up for institutional investors after the company gained US$172m in market cap last week. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 64%.

In the chart below, we zoom in on the different ownership groups of Ardelyx.

View our latest analysis for Ardelyx

What Does The Institutional Ownership Tell Us About Ardelyx?

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.

As you can see, institutional investors have a fair amount of stake in Ardelyx. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Ardelyx's 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. Hedge funds don't have many shares in Ardelyx. Janus Henderson Group plc is currently the largest shareholder, with 11% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.5% and 5.8%, of the shares outstanding, respectively. Additionally, the company's CEO Michael Raab directly holds 0.5% of the total shares outstanding.

After doing some more digging, we found that the top 22 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

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

Insider Ownership Of Ardelyx

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.

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 Ardelyx, Inc.. This is a big company, so it is good to see this level of alignment. Insiders own US$37m worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 36% stake in Ardelyx. 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 Ardelyx better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Ardelyx , and understanding them should be part of your investment process.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.