Stock Analysis

Could The La Jolla Pharmaceutical Company (NASDAQ:LJPC) Ownership Structure Tell Us Something Useful?

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NasdaqCM:LJPC
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The big shareholder groups in La Jolla Pharmaceutical Company (NASDAQ:LJPC) have power over the company. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

La Jolla Pharmaceutical is a smaller company with a market capitalization of US$130m, so it may still be flying under the radar of many institutional investors. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. Let's delve deeper into each type of owner, to discover more about La Jolla Pharmaceutical.

See our latest analysis for La Jolla Pharmaceutical

ownership-breakdown
NasdaqCM:LJPC Ownership Breakdown December 9th 2020

What Does The Institutional Ownership Tell Us About La Jolla Pharmaceutical?

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.

We can see that La Jolla Pharmaceutical does have institutional investors; and they hold a good portion of the company's stock. 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. 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 La Jolla Pharmaceutical's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
NasdaqCM:LJPC Earnings and Revenue Growth December 9th 2020

It looks like hedge funds own 43% of La Jolla Pharmaceutical shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Looking at our data, we can see that the largest shareholder is Tang Capital Management, LLC with 34% of shares outstanding. RTW Investments, LP is the second largest shareholder owning 8.7% of common stock, and BlackRock, Inc. holds about 5.3% of the company stock.

On looking further, we found that 53% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of La Jolla Pharmaceutical

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.

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.

I can report that insiders do own shares in La Jolla Pharmaceutical Company. As individuals, the insiders collectively own US$6.9m worth of the US$130m company. It is good to see some investment by insiders, but I usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.

General Public Ownership

The general public holds a 12% stake in La Jolla Pharmaceutical. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With an ownership of 5.0%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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 La Jolla Pharmaceutical better, we need to consider many other factors. For instance, we've identified 2 warning signs for La Jolla Pharmaceutical 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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