Institutional investors may overlook Zevra Therapeutics, Inc.'s (NASDAQ:ZVRA) recent US$44m market cap drop as long-term gains remain positive

Key Insights

• Significantly high institutional ownership implies Zevra Therapeutics' stock price is sensitive to their trading actions
• The top 11 shareholders own 51% of the company
• Insiders have bought recently

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If you want to know who really controls Zevra Therapeutics, Inc. (NASDAQ:ZVRA), 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 49% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 11% in value last week. Still, the 39% one-year gains may have helped mitigate their overall losses. But they would probably be wary of future losses.

In the chart below, we zoom in on the different ownership groups of Zevra Therapeutics.

See our latest analysis for Zevra Therapeutics

What Does The Institutional Ownership Tell Us About Zevra 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.

We can see that Zevra Therapeutics 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 Zevra Therapeutics' historic earnings and revenue below, but keep in mind there's always more to the story.

Our data indicates that hedge funds own 14% of Zevra Therapeutics. 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. Woodline Partners LP is currently the company's largest shareholder with 7.6% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.5% and 6.7% of the stock.

After doing some more digging, we found that the top 11 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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. 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 Zevra Therapeutics

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.

We can report that insiders do own shares in Zevra Therapeutics, Inc.. In their own names, insiders own US$24m worth of stock in the US$357m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

With a 30% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Zevra Therapeutics. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

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 2 warning signs with Zevra Therapeutics , 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.