Institutional owners may take dramatic actions as Chinook Therapeutics, Inc.'s (NASDAQ:KDNY) recent 12% drop adds to one-year losses

By
Simply Wall St
Published
January 09, 2022
NasdaqGS:KDNY
Source: Shutterstock

To get a sense of who is truly in control of Chinook Therapeutics, Inc. (NASDAQ:KDNY), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 49% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors endured the highest losses after the company's share price fell by 12% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 12% for shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the decline continues, institutional investors may be pressured to sell Chinook Therapeutics which might hurt individual investors.

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

Check out our latest analysis for Chinook Therapeutics

ownership-breakdown
NasdaqGS:KDNY Ownership Breakdown January 9th 2022

What Does The Institutional Ownership Tell Us About Chinook Therapeutics?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

As you can see, institutional investors have a fair amount of stake in Chinook Therapeutics. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Chinook Therapeutics' historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NasdaqGS:KDNY Earnings and Revenue Growth January 9th 2022

We note that hedge funds don't have a meaningful investment in Chinook Therapeutics. Looking at our data, we can see that the largest shareholder is Versant Venture Management, LLC with 13% of shares outstanding. With 13% and 8.4% of the shares outstanding respectively, AbbVie Inc. and Samsara BioCapital LLC are the second and third largest shareholders.

On further inspection, we found that more than half the company's shares are owned by the top 8 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Chinook Therapeutics

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.

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 Chinook Therapeutics, Inc. insiders own under 1% of the company. But they may have an indirect interest through a corporate structure that we haven't picked up on. It has a market capitalization of just US$783m, and the board has only US$7.7m worth of shares in their own names. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 14% stake in Chinook Therapeutics. 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 21% stake in Chinook Therapeutics. This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Public Company Ownership

Public companies currently own 13% of Chinook Therapeutics stock. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Chinook Therapeutics better, we need to consider many other factors. To that end, you should be aware of the 4 warning signs we've spotted with Chinook Therapeutics .

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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