Reata Pharmaceuticals, Inc. (NASDAQ:RETA) institutional owners may be pleased with recent gains after 66% loss over the past year

By
Simply Wall St
Published
March 18, 2022
NasdaqGM:RETA
Source: Shutterstock

To get a sense of who is truly in control of Reata Pharmaceuticals, Inc. (NASDAQ:RETA), it is important to understand the ownership structure of the business. With 74% 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).

Institutional investors would probably welcome last week's 12% increase in share prices after a year of 66% losses as a sign that returns are likely to begin trending higher.

In the chart below, we zoom in on the different ownership groups of Reata Pharmaceuticals.

View our latest analysis for Reata Pharmaceuticals

ownership-breakdown
NasdaqGM:RETA Ownership Breakdown March 18th 2022

What Does The Institutional Ownership Tell Us About Reata Pharmaceuticals?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Reata Pharmaceuticals already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Reata Pharmaceuticals' earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
NasdaqGM:RETA Earnings and Revenue Growth March 18th 2022

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Reata Pharmaceuticals is not owned by hedge funds. The company's largest shareholder is CPMG, Inc., with ownership of 13%. Wellington Management Group LLP is the second largest shareholder owning 12% of common stock, and William Rose holds about 8.7% of the company stock. William Rose, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors. Additionally, the company's CEO J. Huff directly holds 1.8% of the total shares outstanding.

We did some more digging and found that 7 of the top shareholders account for roughly 52% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Reata Pharmaceuticals

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 Reata Pharmaceuticals, Inc.. It is very interesting to see that insiders have a meaningful US$164m stake in this US$1.4b business. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

The general public, who are usually individual investors, hold a 14% stake in Reata Pharmaceuticals. 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. Take risks for example - Reata Pharmaceuticals has 2 warning signs we think you should be aware of.

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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