In this article, I’m going to take a look at PTC Therapeutics Inc’s (NASDAQ:PTCT) 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. The effect of an active institutional investor with a similar ownership as a passive pension-fund can be vastly different on a company’s corporate governance and accountability to shareholders. While this may be more interesting for long-term investors, short-term investors can also benefit by paying attention to when these institutions trade in order to take advantage of the heightened volatility. Now I will analyze PTCT’s shareholder registry in more detail.
Institutional OwnershipPTCT’s 69.07% institutional ownership seems enough to cause large share price movements in the case of significant share sell-off or acquisitions by institutions, particularly when there is a low level of public shares available on the market to trade. Although PTCT 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. Hedge funds, considered active investors, hold a 8.86% stake in the company, which may be the cause of high short-term volatility in the stock price. I am going to further examine PTCT’s ownership structure to check how other major shareholders can affect its investment case.
Insider OwnershipInsiders form a 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. A stake of less than 1% in PTCT is relatively small, though at least there is still 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. It would also be interesting to check what insiders have been doing with their shareholding recently. Insider buying can be a positive indicator of future performance, but a selling decision can be simply driven by personal financial requirements.
General Public OwnershipA big stake of 12.92% in PTCT is held by the general public. 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.
Private Equity OwnershipWith a stake of 5.75%, private equity firms form another important class of owners in PTCT. With a stake of 5.75%, they can influence PTCT’s key policy decisions. This is a positive sign for potential investors as these firms play an important role in aligning company policy with shareholder returns.
Private Company OwnershipAnother group of owners that a potential investor in PTCT should consider are private companies, with a stake of 2.83%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence PTCT’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.
With significant institutional ownership, including active hedge, existing investors should seek a margin of safety when investing in PTCT. This is to avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. However, ownership structure should not be the only determining factor when you’re building an investment thesis for PTCT. Rather, you should be looking at fundamental drivers such as the intrinsic valuation, which is a key driver of Therapeutics’s share price. I urge you to complete your research by taking a look at the following:
- Future Outlook: What are well-informed industry analysts predicting for PTCT’s future growth? Take a look at our free research report of analyst consensus for PTCT’s outlook.
- Past Track Record: Has PTCT 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 PTCT’s historicals for more clarity.
- 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.
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.
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 firstname.lastname@example.org.