Following a 7.9% decline over last year, recent gains may please COMPASS Pathways plc (NASDAQ:CMPS) institutional owners

Key Insights

• Institutions' substantial holdings in COMPASS Pathways implies that they have significant influence over the company's share price
• A total of 13 investors have a majority stake in the company with 51% ownership
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

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A look at the shareholders of COMPASS Pathways plc (NASDAQ:CMPS) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 32% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Last week's US$73m market cap gain would probably be appreciated by institutional investors, especially after a year of 7.9% losses.

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

Check out our latest analysis for COMPASS Pathways

What Does The Institutional Ownership Tell Us About COMPASS Pathways?

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.

COMPASS Pathways 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. 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 COMPASS Pathways' historic earnings and revenue below, but keep in mind there's always more to the story.

It looks like hedge funds own 16% of COMPASS Pathways shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. The company's largest shareholder is RTW Investments, LP, with ownership of 9.9%. With 9.2% and 7.2% of the shares outstanding respectively, Deep Track Capital, LP and Atai Life Sciences N.V. are the second and third largest shareholders.

A closer look at our ownership figures suggests that the top 13 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

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 COMPASS Pathways

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 COMPASS Pathways plc. As individuals, the insiders collectively own US$25m worth of the US$556m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 29% ownership, the general public, mostly comprising of individual investors, have some degree of sway over COMPASS Pathways. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With an ownership of 9.2%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Public Company Ownership

Public companies currently own 7.2% of COMPASS Pathways stock. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 3 warning signs for COMPASS Pathways you should be aware of, and 2 of them are potentially serious.

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.