Institutional investors have a lot riding on 89bio, Inc. (NASDAQ:ETNB) with 58% ownership

Key Insights

• Institutions' substantial holdings in 89bio implies that they have significant influence over the company's share price
• A total of 8 investors have a majority stake in the company with 51% ownership
• Insiders have bought recently

A look at the shareholders of 89bio, Inc. (NASDAQ:ETNB) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 58% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, institutional investors ended up benefitting the most after the company hit US$1.5b in market cap. The one-year return on investment is currently 40% and last week's gain would have been more than welcomed.

Let's take a closer look to see what the different types of shareholders can tell us about 89bio.

View our latest analysis for 89bio

What Does The Institutional Ownership Tell Us About 89bio?

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.

89bio already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 89bio'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. It looks like hedge funds own 11% of 89bio shares. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Janus Henderson Group plc is currently the largest shareholder, with 11% of shares outstanding. With 10% and 5.7% of the shares outstanding respectively, RA Capital Management, L.P. and Suvretta Capital Management, LLC are the second and third largest shareholders.

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.

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 89bio

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.

Our most recent data indicates that insiders own less than 1% of 89bio, Inc.. Keep in mind that it's a big company, and the insiders own US$8.9m worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 20% ownership, the general public, mostly comprising of individual investors, have some degree of sway over 89bio. 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

With a stake of 10%, private equity firms could influence the 89bio board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand 89bio better, we need to consider many other factors. For instance, we've identified 4 warning signs for 89bio (2 shouldn't be ignored) 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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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.