In the wake of Puma Biotechnology, Inc.'s (NASDAQ:PBYI) latest US$17m market cap drop, institutional owners may be forced to take severe actions

By
Simply Wall St
Published
January 07, 2022
NasdaqGS:PBYI
Source: Shutterstock

If you want to know who really controls Puma Biotechnology, Inc. (NASDAQ:PBYI), then you'll have to look at the makeup of its share registry. With 67% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutional investors saw their holdings value drop by 13% last week. The recent loss, which adds to a one-year loss of 75% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in Puma Biotechnology's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

Let's take a closer look to see what the different types of shareholders can tell us about Puma Biotechnology.

See our latest analysis for Puma Biotechnology

ownership-breakdown
NasdaqGS:PBYI Ownership Breakdown January 7th 2022

What Does The Institutional Ownership Tell Us About Puma Biotechnology?

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 Puma Biotechnology does have institutional investors; and they hold a good portion of the company's stock. 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 Puma Biotechnology's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NasdaqGS:PBYI Earnings and Revenue Growth January 7th 2022

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Our data indicates that hedge funds own 8.4% of Puma Biotechnology. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. With a 10% stake, CEO Alan Auerbach is the largest shareholder. Meanwhile, the second and third largest shareholders, hold 8.9% and 8.4%, of the shares outstanding, respectively.

On further inspection, we found that more than half the company's shares are owned by the top 8 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Puma Biotechnology

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.

Our most recent data indicates that insiders own a reasonable proportion of Puma Biotechnology, Inc.. Insiders have a US$12m stake in this US$113m business. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

With a 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Puma Biotechnology. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Be aware that Puma Biotechnology is showing 3 warning signs in our investment analysis , and 1 of those is a bit concerning...

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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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