Hedge funds investors have a lot riding on ESSA Pharma Inc. (NASDAQ:EPIX) with 40% ownership

Key Insights

• Given the large stake in the stock by institutions, ESSA Pharma's stock price might be vulnerable to their trading decisions
• The top 4 shareholders own 55% of the company
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

Every investor in ESSA Pharma Inc. (NASDAQ:EPIX) should be aware of the most powerful shareholder groups. We can see that hedge funds own the lion's share in the company with 40% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And things are looking up for hedge funds investors after the company gained US$24m in market cap last week. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 99%.

In the chart below, we zoom in on the different ownership groups of ESSA Pharma.

Check out our latest analysis for ESSA Pharma

What Does The Institutional Ownership Tell Us About ESSA Pharma?

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.

We can see that ESSA Pharma does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 ESSA Pharma, (below). Of course, keep in mind that there are other factors to consider, too.

It would appear that 40% of ESSA Pharma shares are controlled by hedge funds. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. BVF Partners L.P. is currently the company's largest shareholder with 20% of shares outstanding. In comparison, the second and third largest shareholders hold about 18% and 9.4% of the stock.

On looking further, we found that 55% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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 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 ESSA Pharma

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

Shareholders would probably be interested to learn that insiders own shares in ESSA Pharma Inc.. As individuals, the insiders collectively own US$5.6m worth of the US$249m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 19% stake in ESSA Pharma. 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:

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. To that end, you should learn about the 4 warning signs we've spotted with ESSA Pharma (including 2 which make us uncomfortable) .

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.

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