XOMA Royalty Corporation's (NASDAQ:XOMA) high institutional ownership speaks for itself as stock continues to impress, up 11% over last week

Key Insights

• Institutions' substantial holdings in XOMA Royalty implies that they have significant influence over the company's share price
• 51% of the business is held by the top 5 shareholders
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

If you want to know who really controls XOMA Royalty Corporation (NASDAQ:XOMA), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 35% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And things are looking up for institutional investors after the company gained US$38m in market cap last week. One-year return to shareholders is currently 69% and last week’s gain was the icing on the cake.

Let's take a closer look to see what the different types of shareholders can tell us about XOMA Royalty.

View our latest analysis for XOMA Royalty

What Does The Institutional Ownership Tell Us About XOMA Royalty?

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 XOMA Royalty 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. 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 XOMA Royalty's historic earnings and revenue below, but keep in mind there's always more to the story.

It would appear that 31% of XOMA Royalty shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Looking at our data, we can see that the largest shareholder is BVF Partners L.P. with 31% of shares outstanding. For context, the second largest shareholder holds about 9.9% of the shares outstanding, followed by an ownership of 4.4% by the third-largest shareholder.

On looking further, we found that 51% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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 XOMA Royalty

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our information suggests that XOMA Royalty Corporation insiders own under 1% of the company. It appears that the board holds about US$1.3m worth of stock. This compares to a market capitalization of US$354m. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 33% stake in XOMA Royalty. 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 XOMA Royalty better, we need to consider many other factors. For instance, we've identified 1 warning sign for XOMA Royalty that you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.