Could ProPhase Labs, Inc.'s (NASDAQ:PRPH) Investor Composition Influence The Stock Price?

By
Simply Wall St
Published
April 20, 2020
NasdaqCM:PRPH

If you want to know who really controls ProPhase Labs, Inc. (NASDAQ:PRPH), then you'll have to look at the makeup of its share registry. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.

ProPhase Labs is a smaller company with a market capitalization of US$21m, so it may still be flying under the radar of many institutional investors. Taking a look at our data on the ownership groups (below), it's seems that institutions are not really that prevalent on the share registry. Let's delve deeper into each type of owner, to discover more about ProPhase Labs.

View our latest analysis for ProPhase Labs

NasdaqCM:PRPH Ownership Summary April 20th 2020
NasdaqCM:PRPH Ownership Summary April 20th 2020

What Does The Institutional Ownership Tell Us About ProPhase Labs?

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.

Less than 5% of ProPhase Labs is held by institutional investors. This suggests that some funds have the company in their sights, but many have not yet bought shares in it. If the business gets stronger from here, we could see a situation where more institutions are keen to buy. We sometimes see a rising share price when a few big institutions want to buy a certain stock at the same time. The history of earnings and revenue, which you can see below, could be helpful in considering if more institutional investors will want the stock. Of course, there are plenty of other factors to consider, too.

NasdaqCM:PRPH Income Statement April 20th 2020
NasdaqCM:PRPH Income Statement April 20th 2020

We note that hedge funds don't have a meaningful investment in ProPhase Labs. Looking at our data, we can see that the largest shareholder is the CEO Ted Karkus with 22% of shares outstanding. With 2.7% and 1.9% of the shares outstanding respectively, Mark Burnett and Louis Gleckel are the second and third largest shareholders. Interestingly, Louis Gleckel is also a Member of the Board of Directors, again, indicating strong insider ownership amongst the company's top shareholders.

Our studies suggest that the top 20 shareholders collectively control less than 50% of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of ProPhase Labs

The definition of company insiders can be subjective, and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

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.

It seems insiders own a significant proportion of ProPhase Labs, Inc.. Insiders own US$5.6m worth of shares in the US$21m company. I would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, mostly retail investors, hold a substantial 69% stake in PRPH, suggesting it is a fairly popular stock. With this size of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.

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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with ProPhase Labs , and understanding them should be part of your investment process.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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