Today, I will be analyzing Merus NV’s (NASDAQ:MRUS) recent ownership structure, an important but not-so-popular subject among individual investors. Ownership structure has been found to have an impact on shareholder returns in both short- and long-term. Different types of investors can have varying degrees of influence on a company’s management team. For example, an active institutional investor may be more likely to hold a company accountable for certain actions whereas a passive fund will move in and out of stocks without regards to corporate governance. The implications of these institutions’ actions can either benefit or hinder individual investors, so it is important to understand the ownership composition of your stock investment. Therefore, it is beneficial for us to examine MRUS’s ownership structure in more detail.
Institutional OwnershipWith an institutional ownership of 25.46%, MRUS can face volatile stock price movements if institutions execute block trades on the open market, more so, when there are relatively small amounts of shares available on the market to trade However, as not all institutions are alike, such high volatility events, especially in the short-term, have been more frequently linked to active market participants like hedge funds. Hedge funds, considered active investors, hold a 22.43% stake in the company, which may be the cause of high short-term volatility in the stock price. I am going to further examine MRUS’s ownership structure to check how other major shareholders can affect its investment case.
Insider OwnershipAn 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. With a minor stake in MRUS, insiders seem to have some alignment of interest with shareholders. A higher level of insider ownership has been found to reflect the choosing of projects with higher return on investments compared to lower returning projects for the sake of expansion. In addition to this, it may be interesting to look at insider buying and selling activities. Keep in mind that buying may be sign of upbeat future expectations, but selling doesn’t necessarily mean the opposite as the insiders might just be doing it out of their personal financial needs.
General Public OwnershipA big stake of 10.07% in MRUS 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 Equity OwnershipWith a stake of 25.79%, private equity firms form another important class of owners in MRUS. With a stake of 25.79%, they can influence MRUS’s key policy decisions. An investor should be encouraged by the ownership of these institutions who are known to be experts in increasing efficiency, improving capital structure and opting for value-accretive policy decisions.
Public Company OwnershipAnother group of owners that a potential investor in MRUS should consider are other public companies, with a stake of 15.30%. 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 MRUS’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.
With significant institutional ownership, including active hedge, existing investors should seek a margin of safety when investing in MRUS. This may enable shareholders to comfortably invest in the company and avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. However, if you are building an investment case for MRUS, ownership structure alone should not dictate your decision to buy or sell the stock. Instead, you should be evaluating company-specific factors such as Merus’s past track record and financial health. I urge you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for MRUS’s future growth? Take a look at our free research report of analyst consensus for MRUS’s outlook.
- Financial Health: Is MRUS’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.
- 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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.