Institutional investors in Rezolute, Inc. (NASDAQ:RZLT) lost 11% last week but have reaped the benefits of longer-term growth

Key Insights

• Given the large stake in the stock by institutions, Rezolute's stock price might be vulnerable to their trading decisions
• 53% of the business is held by the top 6 shareholders
• Recent purchases by insiders

Every investor in Rezolute, Inc. (NASDAQ:RZLT) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 71% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors was the group most impacted after the company's market cap fell to US$296m last week. However, the 605% one-year return to shareholders may have helped lessen their pain. They should, however, be mindful of further losses in the future.

Let's delve deeper into each type of owner of Rezolute, beginning with the chart below.

Check out our latest analysis for Rezolute

What Does The Institutional Ownership Tell Us About Rezolute?

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.

As you can see, institutional investors have a fair amount of stake in Rezolute. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Rezolute, (below). Of course, keep in mind that there are other factors to consider, too.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in Rezolute. The company's largest shareholder is Federated Hermes, Inc., with ownership of 20%. With 13% and 7.0% of the shares outstanding respectively, HANDOK Inc. and Federated Equity Management Company of Pennsylvania are the second and third largest shareholders.

We did some more digging and found that 6 of the top shareholders account for roughly 53% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Rezolute

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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.

Our data suggests that insiders own under 1% of Rezolute, Inc. in their own names. It has a market capitalization of just US$296m, and the board has only US$2.6m worth of shares in their own names. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 10% stake in Rezolute. 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.

Private Equity Ownership

With an ownership of 5.0%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Public Company Ownership

We can see that public companies hold 13% of the Rezolute shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Rezolute (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.