A look at the shareholders of Kala Pharmaceuticals, Inc. (NASDAQ:KALA) can tell us which group is most powerful. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Companies that have been privatized tend to have low insider ownership.
With a market capitalization of US$484m, Kala Pharmaceuticals is a small cap stock, so it might not be well known by many institutional investors. In the chart below, we can see that institutions own shares in the company. Let's delve deeper into each type of owner, to discover more about Kala Pharmaceuticals.
What Does The Institutional Ownership Tell Us About Kala 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.
Kala 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 Kala Pharmaceuticals' earnings history below. Of course, the future is what really matters.
Kala Pharmaceuticals is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is RA Capital Management, L.P. with 19% of shares outstanding. The second and third largest shareholders are OrbiMed Advisors LLC and Longitude Capital Management Co., LLC, with an equal amount of shares to their name at 9.7%.
To make our study more interesting, we found that the top 5 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.
While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Kala Pharmaceuticals
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
Our information suggests that Kala Pharmaceuticals, Inc. insiders own under 1% of the company. It has a market capitalization of just US$484m, and the board has only US$3.2m worth of shares in their own names. I generally like to see a board more invested. However it might be worth checking if those insiders have been buying.
General Public Ownership
With a 24% ownership, the general public have some degree of sway over Kala Pharmaceuticals. 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
With a stake of 39%, private equity firms could influence the Kala Pharmaceuticals board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.
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. For example, we've discovered 1 warning sign for Kala Pharmaceuticals that you should be aware of before investing here.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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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