BeiGene, Ltd.'s (NASDAQ:BGNE) recent 15% pullback adds to one-year year losses, institutional owners may take drastic measures

Key Insights

• Given the large stake in the stock by institutions, BeiGene's stock price might be vulnerable to their trading decisions
• The top 6 shareholders own 50% of the company
• Insiders have sold recently

Every investor in BeiGene, Ltd. (NASDAQ:BGNE) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 46% to be precise, is institutions. 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$3.3b. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 3.4% for shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the decline continues, institutional investors may be pressured to sell BeiGene which might hurt individual investors.

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

See our latest analysis for BeiGene

What Does The Institutional Ownership Tell Us About BeiGene?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

We can see that BeiGene does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at BeiGene's earnings history below. Of course, the future is what really matters.

Our data indicates that hedge funds own 17% of BeiGene. 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. Amgen Inc. is currently the largest shareholder, with 18% of shares outstanding. With 9.0% and 8.1% of the shares outstanding respectively, Baker Bros. Advisors LP and HHLR Advisors, Ltd. are the second and third largest shareholders. Furthermore, CEO John Oyler is the owner of 3.5% of the company's shares.

On further inspection, we found that more than half the company's shares are owned by the top 6 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of BeiGene

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 BeiGene, Ltd.. It is a very large company, and board members collectively own US$866m worth of shares (at current prices). Most would say this shows a good alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 14% stake in BeiGene. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Public Company Ownership

We can see that public companies hold 18% of the BeiGene shares on issue. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for BeiGene that you should be aware of before investing here.

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.