Institutional investors may adopt severe steps after Aura Biosciences, Inc.'s (NASDAQ:AURA) latest 20% drop adds to a year losses

Key Insights

• Institutions' substantial holdings in Aura Biosciences implies that they have significant influence over the company's share price
• The top 6 shareholders own 50% of the company
• Recent sales by insiders

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To get a sense of who is truly in control of Aura Biosciences, Inc. (NASDAQ:AURA), it is important to understand the ownership structure of the business. With 48% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, institutional investors endured the highest losses last week after market cap fell by US$75m. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 22% might not go down well especially with this category of shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. Hence, if weakness in Aura Biosciences' share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

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

View our latest analysis for Aura Biosciences

What Does The Institutional Ownership Tell Us About Aura Biosciences?

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.

Aura Biosciences already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Aura Biosciences, (below). Of course, keep in mind that there are other factors to consider, too.

It looks like hedge funds own 29% of Aura Biosciences 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. Matrix Capital Management Company, LP is currently the largest shareholder, with 14% of shares outstanding. With 9.8% and 8.2% of the shares outstanding respectively, Adage Capital Management, L.P. and Eventide Asset Management, LLC are the second and third largest shareholders.

We did some more digging and found that 6 of the top shareholders account for roughly 50% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 Aura Biosciences

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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.

We can see that insiders own shares in Aura Biosciences, Inc.. In their own names, insiders own US$5.9m worth of stock in the US$354m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 16% stake in Aura Biosciences. 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 an ownership of 6.1%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Aura Biosciences better, we need to consider many other factors. Take risks for example - Aura Biosciences has 4 warning signs (and 2 which are potentially serious) we think you should know about.

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.