A look at the shareholders of DiaMedica Therapeutics Inc. (NASDAQ:DMAC) can tell us which group is most powerful. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.
DiaMedica Therapeutics is a smaller company with a market capitalization of US$139m, so it may still be flying under the radar of many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutions own shares in the company. Let's take a closer look to see what the different types of shareholders can tell us about DiaMedica Therapeutics.
What Does The Institutional Ownership Tell Us About DiaMedica Therapeutics?
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.
As you can see, institutional investors have a fair amount of stake in DiaMedica Therapeutics. 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 DiaMedica Therapeutics' historic earnings and revenue below, but keep in mind there's always more to the story.
It would appear that 5.4% of DiaMedica Therapeutics shares are controlled by hedge funds. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Our data shows that Zhenyu Xiao is the largest shareholder with 5.0% of shares outstanding. For context, the second largest shareholder holds about 4.5% of the shares outstanding, followed by an ownership of 3.0% by the third-largest shareholder.
A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where 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 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 DiaMedica Therapeutics
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
I can report that insiders do own shares in DiaMedica Therapeutics Inc.. In their own names, insiders own US$10m worth of stock in the US$139m company. This shows at least some alignment, but I usually like to see larger insider holdings. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public holds a substantial 59% stake in DiaMedica Therapeutics, suggesting it is a fairly popular stock. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 3 warning signs for DiaMedica Therapeutics that you should be aware of.
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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