Hedge funds investors in ADC Therapeutics SA (NYSE:ADCT) see US$53m decrease in market cap last week, although long-term gains have benefitted them.

Key Insights

• Given the large stake in the stock by institutions, ADC Therapeutics' stock price might be vulnerable to their trading decisions
• The top 7 shareholders own 51% of the company
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

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Every investor in ADC Therapeutics SA (NYSE:ADCT) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are hedge funds with 30% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

No shareholder likes losing money on their investments, especially hedge funds investors who saw their holdings drop 10% in value last week. However, the 42% one-year return to shareholders may have helped lessen their pain. We would assume however, that they would be on the lookout for weakness in the future.

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

See our latest analysis for ADC Therapeutics

What Does The Institutional Ownership Tell Us About ADC Therapeutics?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors have a fair amount of stake in ADC 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. 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 ADC Therapeutics' earnings history below. Of course, the future is what really matters.

It looks like hedge funds own 30% of ADC Therapeutics shares. 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. Our data shows that Redmile Group, LLC is the largest shareholder with 14% of shares outstanding. For context, the second largest shareholder holds about 9.3% of the shares outstanding, followed by an ownership of 7.7% by the third-largest shareholder. Additionally, the company's CEO Ameet Mallik directly holds 1.4% of the total shares outstanding.

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 ADC Therapeutics

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 most recent data indicates that insiders own some shares in ADC Therapeutics SA. As individuals, the insiders collectively own US$15m worth of the US$450m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 23% ownership, the general public, mostly comprising of individual investors, have some degree of sway over ADC Therapeutics. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

Private equity firms hold a 5.3% stake in ADC Therapeutics. This suggests they can be influential in key policy decisions. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

We can see that Private Companies own 9.7%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with ADC Therapeutics (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

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. 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.