Institutional owners may ignore Centessa Pharmaceuticals plc's (NASDAQ:CNTA) recent US$134m market cap decline as longer-term profits stay in the green

Key Insights

• Given the large stake in the stock by institutions, Centessa Pharmaceuticals' stock price might be vulnerable to their trading decisions
• 51% of the business is held by the top 8 shareholders
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

If you want to know who really controls Centessa Pharmaceuticals plc (NASDAQ:CNTA), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 42% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors endured the highest losses after the company's market cap fell by US$134m last week. However, the 50% one-year return to shareholders may have helped lessen their pain. But they would probably be wary of future losses.

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

View our latest analysis for Centessa Pharmaceuticals

What Does The Institutional Ownership Tell Us About Centessa Pharmaceuticals?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in Centessa Pharmaceuticals. 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. 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 Centessa Pharmaceuticals' historic earnings and revenue below, but keep in mind there's always more to the story.

Centessa Pharmaceuticals is not owned by hedge funds. Medicxi Ventures (UK) LLP is currently the company's largest shareholder with 18% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 8.8% and 8.6%, of the shares outstanding, respectively.

We did some more digging and found that 8 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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

Insider Ownership Of Centessa Pharmaceuticals

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

We can see that insiders own shares in Centessa Pharmaceuticals plc. It has a market capitalization of just US$963m, and insiders have US$20m worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 21% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Centessa Pharmaceuticals. 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

Private equity firms hold a 35% stake in Centessa Pharmaceuticals. This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

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 instance, we've identified 2 warning signs for Centessa Pharmaceuticals that you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com