In the wake of Bausch Health Companies Inc.'s (NYSE:BHC) latest US$196m market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Significantly high institutional ownership implies Bausch Health Companies' stock price is sensitive to their trading actions
• The top 8 shareholders own 51% of the company
• Insiders have bought recently

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If you want to know who really controls Bausch Health Companies Inc. (NYSE:BHC), then you'll have to look at the makeup of its share registry. With 51% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And institutional investors saw their holdings value drop by 7.7% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 13% might not go down well especially with this category of shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. Hence, if weakness in Bausch Health Companies' share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

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

See our latest analysis for Bausch Health Companies

What Does The Institutional Ownership Tell Us About Bausch Health Companies?

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 Bausch Health Companies. 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. 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 Bausch Health Companies' earnings history below. Of course, the future is what really matters.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. It looks like hedge funds own 17% of Bausch Health Companies shares. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Alexander Meruelo is currently the largest shareholder, with 9.9% of shares outstanding. For context, the second largest shareholder holds about 9.4% of the shares outstanding, followed by an ownership of 8.9% by the third-largest shareholder.

We also observed that the top 8 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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Bausch Health Companies

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.

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.

It seems insiders own a significant proportion of Bausch Health Companies Inc.. It has a market capitalization of just US$2.4b, and insiders have US$249m worth of shares in their own names. That's quite significant. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 21% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Bausch Health Companies better, we need to consider many other factors. For instance, we've identified 1 warning sign for Bausch Health Companies that you should be aware of.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

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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.