A look at the shareholders of Recro Pharma, Inc. (NASDAQ:REPH) can tell us which group is most powerful. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. Companies that have been privatized tend to have low insider ownership.
Recro Pharma is a smaller company with a market capitalization of US$108m, so it may still be flying under the radar of many institutional investors. In the chart below, we can see that institutions own shares in the company. Let’s delve deeper into each type of owner, to discover more about Recro Pharma.
What Does The Institutional Ownership Tell Us About Recro Pharma?
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 Recro Pharma. 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. When multiple institutions own a stock, there’s always a risk that they are in a ‘crowded trade’. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Recro Pharma’s historic earnings and revenue below, but keep in mind there’s always more to the story.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. It looks like hedge funds own 11% of Recro Pharma 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. Renaissance Technologies Corp. is currently the largest shareholder, with 5.8% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.7% and 5.5% of the stock.
After doing some more digging, we found that the top 14 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.
Researching institutional ownership is a good way to gauge and filter a stock’s expected performance. The same can be achieved by studying analyst sentiments. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.
Insider Ownership Of Recro 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. 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.
We can see that insiders own shares in Recro Pharma, Inc.. It has a market capitalization of just US$108m, and insiders have US$2.1m worth of shares, in their own names. It is good to see some investment by insiders, but I usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.
General Public Ownership
The general public holds a 30% stake in Recro Pharma. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Like risks, for instance. Every company has them, and we’ve spotted 4 warning signs for Recro Pharma (of which 1 can’t be ignored!) you should know about.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.
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.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.