Institutional investors are Eton Pharmaceuticals, Inc.'s (NASDAQ:ETON) biggest bettors and were rewarded after last week's US$48m market cap gain

Key Insights

• Given the large stake in the stock by institutions, Eton Pharmaceuticals' stock price might be vulnerable to their trading decisions
• 50% of the business is held by the top 20 shareholders
• Insiders have sold recently

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Every investor in Eton Pharmaceuticals, Inc. (NASDAQ:ETON) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 36% 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 institutional investors after the company gained US$48m in market cap last week. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 361%.

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

Check out our latest analysis for Eton Pharmaceuticals

What Does The Institutional Ownership Tell Us About Eton 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.

Eton Pharmaceuticals already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Eton Pharmaceuticals' earnings history below. Of course, the future is what really matters.

It would appear that 18% of Eton Pharmaceuticals 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. The company's largest shareholder is Opaleye Management Inc., with ownership of 11%. EcoR1 Capital, LLC is the second largest shareholder owning 7.2% of common stock, and Nantahala Capital Management, LLC holds about 4.4% of the company stock. Additionally, the company's CEO Sean Brynjelsen directly holds 4.0% of the total shares outstanding.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 20 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Eton Pharmaceuticals

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 information suggests that insiders maintain a significant holding in Eton Pharmaceuticals, Inc.. It has a market capitalization of just US$386m, and insiders have US$54m worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 32% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Eton Pharmaceuticals has 1 warning sign we think 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.