In this analysis, my focus will be on developing a perspective on Axsome Therapeutics Inc’s (NASDAQ:AXSM) latest ownership structure, a less discussed, but important factor. When it comes to ownership structure of a company, the impact has been observed in both the long-and short-term performance of shares. The effect of an active institutional investor with a similar ownership as a passive pension-fund can be vastly different on a company’s corporate governance and accountability to shareholders. While this may be more interesting for long-term investors, short-term investors can also benefit by paying attention to when these institutions trade in order to take advantage of the heightened volatility. Therefore, I will take a look at AXSM’s shareholders in more detail.See our latest analysis for Axsome Therapeutics
Institutional OwnershipIn AXSM’s case, institutional ownership stands at 16.37%, significant enough to cause considerable price moves in the case of large institutional transactions, especially when there is a low level of public shares available on the market to trade. Although AXSM has a high institutional ownership, such stock moves, in the short-term, are more commonly linked to a particular type of active institutional investors – hedge funds. For shareholders in AXSM, sharp price movements may not be a major concern as active hedge funds hold a relatively small stake in the company. Although this doesn’t necessarily lead to high short-term volatility, we should dig deeper into AXSM’s ownership structure to find how the remaining owner types can affect its investment profile.
Insider OwnershipAnother important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. AXSM insiders are also influential stakeholders with 6.55% ownership in the company. An insider stake of this level indicates that executives are highly aligned with the shareholders as both stand to gain when the value of the company rises. I will also like to check what insiders have been doing recently with their holdings. insider buying may be a sign of upbeat future expectations, however, selling doesn’t necessarily mean the opposite as insiders may be motivated by their personal financial needs.
General Public OwnershipThe general public holds a substantial 48.46% stake in AXSM, making it a highly popular stock among retail investors. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.
Private Company OwnershipPotential investors in AXSM should also look at another important group of investors: private companies, with a stake of 28.61%, who are primarily invested because of strategic and capital gain interests. With this size of ownership in AXSM, this ownership class can affect the company’s business strategy. As a result, potential investors should further explore the company’s business relations with these companies and find out if they can affect shareholder returns in the long-term.
AXSM’s considerably high level of institutional ownership calls for further analysis into its margin of safety. This is to avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. However, ownership structure should not be the only focus of your research when constructing an investment thesis around AXSM. Instead, you should be evaluating company-specific factors such as Axsome Therapeutics’s past track record and financial health. I urge you to complete your research by taking a look at the following:
- Financial Health: Is AXSM’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.