Do Insiders Own Lots Of Shares In Royalty Pharma plc (NASDAQ:RPRX)? – Simply Wall St

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If you want to know who really controls Royalty Pharma plc (NASDAQ:RPRX), then you’ll have to look at the makeup of its share registry. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said ‘Show me the incentive and I will show you the outcome.

Royalty Pharma is a pretty big company. It has a market capitalization of US$18b. Normally institutions would own a significant portion of a company this size. In the chart below, we can see that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about Royalty Pharma.

See our latest analysis for Royalty Pharma

ownership-breakdown

NasdaqGS:RPRX Ownership Breakdown February 1st 2021

What Does The Institutional Ownership Tell Us About Royalty Pharma?

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 Royalty Pharma does have institutional investors; and they hold a good portion of the company’s stock. 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 Royalty Pharma, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth

NasdaqGS:RPRX Earnings and Revenue Growth February 1st 2021

It would appear that 10.0% of Royalty Pharma shares are controlled by hedge funds. 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. Looking at our data, we can see that the largest shareholder is Mario Giuliani with 15% of shares outstanding. In comparison, the second and third largest shareholders hold about 10.0% and 6.9% of the stock.

On further inspection, we found that more than half the company’s shares are owned by the top 8 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 Royalty Pharma

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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 most recent data indicates that insiders own a reasonable proportion of Royalty Pharma plc. Insiders own US$2.9b worth of shares in the US$18b company. That’s quite meaningful. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public holds a 32% stake in Royalty Pharma. 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.

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 risks, for instance. Every company has them, and we’ve spotted 2 warning signs for Royalty Pharma you should know about.

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. 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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