Catalyst Pharmaceuticals, Inc.'s (NASDAQ:CPRX) large institutional owners must be happy as stock continues to impress, up 18% over the past week

Key Insights

• Significantly high institutional ownership implies Catalyst Pharmaceuticals' stock price is sensitive to their trading actions
• The top 14 shareholders own 50% of the company
• Recent sales by insiders

Every investor in Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 81% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And things are looking up for institutional investors after the company gained US$477m in market cap last week. One-year return to shareholders is currently 62% and last week’s gain was the icing on the cake.

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

Check out our latest analysis for Catalyst Pharmaceuticals

What Does The Institutional Ownership Tell Us About Catalyst Pharmaceuticals?

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.

Catalyst Pharmaceuticals already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Catalyst Pharmaceuticals, (below). Of course, keep in mind that there are other factors to consider, too.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Hedge funds don't have many shares in Catalyst Pharmaceuticals. The company's largest shareholder is BlackRock, Inc., with ownership of 16%. Meanwhile, the second and third largest shareholders, hold 6.9% and 4.8%, of the shares outstanding, respectively.

A closer look at our ownership figures suggests that the top 14 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Catalyst Pharmaceuticals

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.

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 Catalyst Pharmaceuticals, Inc.. This is a big company, so it is good to see this level of alignment. Insiders own US$184m worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 12% stake in Catalyst Pharmaceuticals. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Catalyst Pharmaceuticals better, we need to consider many other factors. Take risks for example - Catalyst Pharmaceuticals has 1 warning sign we think you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.