Stock Analysis

Recent uptick might appease Royalty Pharma plc (NASDAQ:RPRX) institutional owners after losing 3.2% over the past year

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Key Insights

  • Institutions' substantial holdings in Royalty Pharma implies that they have significant influence over the company's share price
  • A total of 7 investors have a majority stake in the company with 50% ownership
  • Insiders have been selling lately

To get a sense of who is truly in control of Royalty Pharma plc (NASDAQ:RPRX), it is important to understand the ownership structure of the business. With 68% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Last week's US$979m market cap gain would probably be appreciated by institutional investors, especially after a year of 3.2% losses.

In the chart below, we zoom in on the different ownership groups of Royalty Pharma.

See our latest analysis for Royalty Pharma

NasdaqGS:RPRX Ownership Breakdown March 29th 2023

What Does The Institutional Ownership Tell Us About Royalty Pharma?

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.

We can see that Royalty Pharma does have institutional investors; and they hold a good portion of the company's stock. 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 Royalty Pharma's earnings history below. Of course, the future is what really matters.

NasdaqGS:RPRX Earnings and Revenue Growth March 29th 2023

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Royalty Pharma is not owned by hedge funds. Mario Giuliani is currently the largest shareholder, with 12% of shares outstanding. For context, the second largest shareholder holds about 10.0% of the shares outstanding, followed by an ownership of 9.5% by the third-largest shareholder. Furthermore, CEO Pablo Legorreta is the owner of 0.6% of the company's shares.

We also observed that the top 7 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Royalty Pharma

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

It seems insiders own a significant proportion of Royalty Pharma plc. Insiders own US$3.3b worth of shares in the US$23b company. That's quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 17% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

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. To that end, you should learn about the 5 warning signs we've spotted with Royalty Pharma (including 1 which shouldn't be ignored) .

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

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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