In this article, I’m going to take a look at MediciNova Inc’s (NASDAQ:MNOV) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. Ownership structure has been found to have an impact on shareholder returns in both short- and long-term. Differences in ownership structure of companies can have a profound effect on how management’s incentives are aligned with shareholder returns, and whether they adhere to corporate governance best practices. Although this is an important factor for long-term investors, many investors can also be impacted by institutional presence and their high-volume trading. Now I will analyze MNOV’s shareholder registry in more detail.Check out our latest analysis for MediciNova
Institutional OwnershipIn MNOV’s case, institutional ownership stands at 19.08%, significant enough to cause considerable price moves in the case of large institutional transactions, especially when there is a low level of public shares available on the market to trade. Although MNOV has a high institutional ownership, such stock moves, in the short-term, are more commonly linked to a particular type of active institutional investors – hedge funds. For MNOV shareholders, the potential of this type of share price volatility shouldn’t be as concerning as hedge fund ownership is is not significant,indicating few chances of such sudden price moves. While that hardly seems concerning, I will explore further into MNOV’s ownership type to find out how it can affect the company’s investment profile.
Insider OwnershipInsiders form another group of important ownership types as they manage the company’s operations and decide the best use of capital. Insider ownership has been linked to better alignment between management and shareholders. With 6.33% ownership, MNOV insiders is an important ownership type. This level of stake with insiders indicate highly aligned interests of shareholders and company executives. However, it would be interesting to take a look at their buying and selling activities lately. Buying may be sign of upbeat future expectations, but selling doesn’t necessarily mean the opposite as the insiders may be motivated by financial needs or they are simply diversifying their risk.
General Public OwnershipThe general public holds a substantial 71.17% stake in MNOV, making it a highly popular stock among retail investors. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.
Public Company OwnershipAnother important group of owners for potential investors in MNOV are other public companies that hold a stake of 3.42% in MNOV. These are the companies that are mainly invested due to their strategic interests or incentivized by reaping capital gains on investments. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence MNOV’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
MNOV’s considerably high level of institutional ownership calls for further analysis into its margin of safety. This will allow investors to reduce the impact of non-fundamental factors, such as volatile block trading impact on their portfolio value. However, if you are building an investment case for MNOV, ownership structure alone should not dictate your decision to buy or sell the stock. Rather, you should be examining fundamental factors such as MediciNova’s past track record and financial health. I urge you to complete your research by taking a look at the following:
- 1. Future Outlook: What are well-informed industry analysts predicting for MNOV’s future growth? Take a look at our free research report of analyst consensus for MNOV’s outlook.
- 2. Past Track Record: Has MNOV been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of MNOV’s historicals for more clarity.
- 3. 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.