A look at the shareholders of Terns Pharmaceuticals, Inc. (NASDAQ:TERN) can tell us which group is most powerful. With 40% stake, individual investors possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
As a result, individual investors were the biggest beneficiaries of last week’s 91% gain.
Let's take a closer look to see what the different types of shareholders can tell us about Terns Pharmaceuticals.
What Does The Institutional Ownership Tell Us About Terns Pharmaceuticals?
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.
As you can see, institutional investors have a fair amount of stake in Terns Pharmaceuticals. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Terns Pharmaceuticals, (below). Of course, keep in mind that there are other factors to consider, too.
We note that hedge funds don't have a meaningful investment in Terns Pharmaceuticals. Looking at our data, we can see that the largest shareholder is Eli Lilly Investment Consulting (Shanghai) Co., Ltd. with 13% of shares outstanding. OrbiMed Advisors LLC is the second largest shareholder owning 10% of common stock, and Vivo Capital, LLC holds about 7.1% of the company stock.
On further inspection, we found that more than half the company's shares are owned by the top 10 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
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. There is some analyst coverage of the stock, but it could still become more well known, with time.
Insider Ownership Of Terns Pharmaceuticals
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.
I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.
Our data suggests that insiders own under 1% of Terns Pharmaceuticals, Inc. in their own names. It seems the board members have no more than US$1.4m worth of shares in the US$173m company. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.
General Public Ownership
The general public-- including retail investors -- own 40% 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.
Private Equity Ownership
With an ownership of 30%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 4 warning signs for Terns Pharmaceuticals (2 are concerning) 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.
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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.
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