Following a 66% decline over last year, recent gains may please Editas Medicine, Inc. (NASDAQ:EDIT) institutional owners

Key Insights

• Significantly high institutional ownership implies Editas Medicine's stock prices are sensitive to their trading actions.
• The top 16 shareholders own 50% of the company
• Insiders have been selling lately

To get a sense of who is truly in control of Editas Medicine, Inc. (NASDAQ:EDIT), it is important to understand the ownership structure of the business. With 74% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Last week's US$55m market cap gain would probably be appreciated by institutional investors, especially after a year of 66% losses.

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

See our latest analysis for Editas Medicine

What Does The Institutional Ownership Tell Us About Editas Medicine?

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.

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

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Editas Medicine is not owned by hedge funds. BlackRock, Inc. is currently the company's largest shareholder with 10% of shares outstanding. In comparison, the second and third largest shareholders hold about 10.0% and 9.4% of the stock.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 16 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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 Editas Medicine

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.

Our data suggests that insiders own under 1% of Editas Medicine, Inc. in their own names. It seems the board members have no more than US$2.6m worth of shares in the US$691m company. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 26% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Editas Medicine. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Editas Medicine better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Editas Medicine (at least 1 which can't be ignored) , and understanding them should be part of your investment process.

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.