Yahoo Finance Following a 20% decline over last year, recent gains may please Galapagos NV (AMS:GLPG) institutional owners
To get a sense of who is truly in control of Galapagos NV (AMS:GLPG), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 40% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Last week's €131m market cap gain would probably be appreciated by institutional investors, especially after a year of 20% losses.
Let's take a closer look to see what the different types of shareholders can tell us about Galapagos.
See our latest analysis for Galapagos
What Does The Institutional Ownership Tell Us About Galapagos?
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 Galapagos does have institutional investors; and they hold a good portion of the company's stock. 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 Galapagos' earnings history below. Of course, the future is what really matters.
Our data indicates that hedge funds own 5.2% of Galapagos. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Our data shows that Gilead Sciences, Inc. is the largest shareholder with 25% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 11% and 7.0%, of the shares outstanding, respectively.
Our research also brought to light the fact that roughly 53% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.
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 Galapagos
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 Galapagos NV insiders own under 1% of the company. Keep in mind that it's a big company, and the insiders own €22m worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
The general public-- including retail investors -- own 22% stake in the company, and hence can't easily be ignored. 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.
Private Equity Ownership
With a stake of 7.0%, private equity firms could influence the Galapagos board. 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.
Public Company Ownership
Public companies currently own 25% of Galapagos stock. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.
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 2 warning signs with Galapagos (at least 1 which is potentially serious) , 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.
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.
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