In the wake of Inhibikase Therapeutics, Inc.'s (NASDAQ:IKT) latest US$29m market cap drop, hedge funds owners may be forced to take severe actions

Key Insights

• Significantly high institutional ownership implies Inhibikase Therapeutics' stock price is sensitive to their trading actions
• A total of 6 investors have a majority stake in the company with 55% ownership
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

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A look at the shareholders of Inhibikase Therapeutics, Inc. (NASDAQ:IKT) can tell us which group is most powerful. The group holding the most number of shares in the company, around 31% to be precise, is hedge funds. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And hedge funds investors saw their holdings value drop by 17% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 10% for shareholders. Hedge funds typically use aggressive strategies that focus on short-term gains. Given their high ownership in Inhibikase Therapeutics, they wield significant power and continued under performance can lead to them influencing management decisions which might not be evaluating the company’s long-term prospects.

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

Check out our latest analysis for Inhibikase Therapeutics

What Does The Institutional Ownership Tell Us About Inhibikase Therapeutics?

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.

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

It would appear that 31% of Inhibikase 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. The company's largest shareholder is Sands Capital Ventures, LLC, with ownership of 15%. In comparison, the second and third largest shareholders hold about 8.5% and 8.2% of the stock.

On further inspection, we found that more than half the company's shares are owned by the top 6 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 Inhibikase Therapeutics

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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.

Shareholders would probably be interested to learn that insiders own shares in Inhibikase Therapeutics, Inc.. In their own names, insiders own US$6.2m worth of stock in the US$162m company. Some would say this shows alignment of interests between shareholders and the board, though we generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 14% stake in the company, and hence can't easily be ignored. 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.

Private Equity Ownership

Private equity firms hold a 23% stake in Inhibikase Therapeutics. This suggests they can be influential in key policy decisions. 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.

Private Company Ownership

We can see that Private Companies own 7.9%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Inhibikase Therapeutics better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for Inhibikase Therapeutics you should be aware of, and 2 of them are a bit unpleasant.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company .

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.