In this article, I’m going to take a look at Moleculin Biotech Inc’s (NASDAQ:MBRX) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. A company’s ownership structure is often linked to its share performance in both the long- and short-term. The effect of an active institutional investor with a similar ownership as a passive pension-fund can be vastly different on a company’s corporate governance and accountability to shareholders. While this may be more interesting for long-term investors, short-term investors can also benefit by paying attention to when these institutions trade in order to take advantage of the heightened volatility. Therefore, it is beneficial for us to examine MBRX’s ownership structure in more detail.View our latest analysis for Moleculin Biotech
Institutional OwnershipDue to the big order sizes of institutional investors, a company’s shares can experience large, one-sided momentum, driven by high volume of shares removed from, or injected into, the market. Generally, an institutional ownership of 2.61%, in the case of MBRX, should not concern investors in terms of high stock volatility. But investors should also check whether hedge funds, mostly active investors with a short-term horizon, have a significant stake. They own 5.83% of MBRX’s outstanding shares, enough to cause a spike in volatility, at least in the short-term. I am going to further examine the stock’s other major shareholders to figure out how they can affect the company’s investment profile for the long-term investor.
Insider OwnershipAnother important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. A major group of owners of MBRX is individual insiders, sitting with a hefty 16.38% stake in the company. Broadly, insider ownership of this level has been found to negatively affect companies with consistently low PE ratio (underperforming). And a positive impact has been seen on companies with a high PE ratio (outperforming). Another aspect of insider ownership is to learn about their recent transactions. While insider buying is possibly a sign of a positive outlook for the company, selling doesn’t necessarily indicate a negative outlook as they may be selling to meet personal financial needs.
General Public OwnershipA substantial ownership of 64.76% in MBRX is held by the general public. With this size of ownership, retail investors can collectively play a role in major company policies that affect shareholders returns, including executive remuneration and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.
Private Company OwnershipAnother group of owners that a potential investor in MBRX should consider are private companies, with a stake of 10.42%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. This kind of ownership, if predominantly strategic, can give these companies a significant power to affect MBRX’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.
Although MBRX has a low level of overall institutional ownership, active hedge funds still have a significant stake in the company. This level of ownership is a non-fundamental factor that can impact stock prices in the short-term. A factor to consider is whether MBRX offers enough margin of safety compared to its intrinsic value. However, if you are building an investment case for MBRX, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be examining fundamental factors such as Moleculin Biotech’s past track record and financial health. I urge you to complete your research by taking a look at the following:
- 1. Financial Health: Is MBRX’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- 2. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.