Could The Protara Therapeutics, Inc. (NASDAQ:TARA) Ownership Structure Tell Us Something Useful?

By
Simply Wall St
Published
September 29, 2020
NasdaqGM:TARA

If you want to know who really controls Protara Therapeutics, Inc. (NASDAQ:TARA), then you'll have to look at the makeup of its share registry. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.

Protara Therapeutics is a smaller company with a market capitalization of US$175m, 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 seems that institutions own shares in the company. Let's delve deeper into each type of owner, to discover more about Protara Therapeutics.

Check out our latest analysis for Protara Therapeutics

ownership-breakdown
NasdaqCM:TARA Ownership Breakdown September 29th 2020

What Does The Institutional Ownership Tell Us About Protara Therapeutics?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in Protara Therapeutics. 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Protara Therapeutics' historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
NasdaqCM:TARA Earnings and Revenue Growth September 29th 2020

It would appear that 29% of Protara Therapeutics shares are controlled by hedge funds. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Opaleye Management Inc. is currently the company's largest shareholder with 24% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.6% and 5.6%, of the shares outstanding, respectively. Jesse Shefferman, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

We also observed that the top 6 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 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. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Protara Therapeutics

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 Protara Therapeutics, Inc.. It has a market capitalization of just US$175m, and insiders have US$25m worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

With a 40% ownership, the general public have some degree of sway over Protara Therapeutics. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Protara Therapeutics better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 4 warning signs for Protara Therapeutics you should know about.

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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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. 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.
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