Key Insights

• Significantly high institutional ownership implies XOMA Royalty's stock price is sensitive to their trading actions
• The top 5 shareholders own 53% of the company
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

Every investor in XOMA Royalty Corporation (NASDAQ:XOMA) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 47% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And things are looking up for institutional investors after the company gained US$40m in market cap last week. One-year return to shareholders is currently 18% and last week’s gain was the icing on the cake.

In the chart below, we zoom in on the different ownership groups of XOMA Royalty.

What Does The Institutional Ownership Tell Us About XOMA Royalty?

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.

We can see that XOMA Royalty 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. 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 XOMA Royalty's historic earnings and revenue below, but keep in mind there's always more to the story.

Our data indicates that hedge funds own 21% of XOMA Royalty. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. BVF Partners L.P. is currently the largest shareholder, with 21% of shares outstanding. For context, the second largest shareholder holds about 13% of the shares outstanding, followed by an ownership of 8.7% by the third-largest shareholder. Additionally, the company's CEO Owen Hughes directly holds 0.8% of the total shares outstanding.

On looking further, we found that 53% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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 are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of XOMA Royalty

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 some shares in XOMA Royalty Corporation. In their own names, insiders own US$6.0m worth of stock in the US$370m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 31% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

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.

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. 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.