Mirum Pharmaceuticals, Inc.'s (NASDAQ:MIRM) 11% loss last week hit both individual investors who own 37% as well as institutions

By
Simply Wall St
Published
May 13, 2022
NasdaqGM:MIRM
Source: Shutterstock

To get a sense of who is truly in control of Mirum Pharmaceuticals, Inc. (NASDAQ:MIRM), it is important to understand the ownership structure of the business. With 37% stake, private equity firms possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While the holdings of private equity firms took a hit after last week’s 11% price drop, institutions with their 31% holdings also suffered.

In the chart below, we zoom in on the different ownership groups of Mirum Pharmaceuticals.

Check out our latest analysis for Mirum Pharmaceuticals

ownership-breakdown
NasdaqGM:MIRM Ownership Breakdown May 13th 2022

What Does The Institutional Ownership Tell Us About Mirum Pharmaceuticals?

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.

As you can see, institutional investors have a fair amount of stake in Mirum Pharmaceuticals. 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 Mirum Pharmaceuticals' historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NasdaqGM:MIRM Earnings and Revenue Growth May 13th 2022

It looks like hedge funds own 10% of Mirum Pharmaceuticals shares. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Looking at our data, we can see that the largest shareholder is New Enterprise Associates, Inc. with 13% of shares outstanding. Frazier Management, L.L.C. is the second largest shareholder owning 11% of common stock, and Deerfield Management Company, L.P. Series C holds about 10% of the company stock. Furthermore, CEO Christopher Peetz is the owner of 0.7% of the company's shares.

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 Mirum Pharmaceuticals

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Shareholders would probably be interested to learn that insiders own shares in Mirum Pharmaceuticals, Inc.. In their own names, insiders own US$19m worth of stock in the US$707m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 17% stake in the company, and hence can't easily be ignored. 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

Private equity firms hold a 37% stake in Mirum Pharmaceuticals. This suggests they can be influential in key policy decisions. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 2 warning signs for Mirum Pharmaceuticals that you should be aware of.

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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