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To get a sense of who is truly in control of Royalty Pharma plc (NASDAQ:RPRX), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 72% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Given the vast amount of money and research capacities at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.
Let’s delve deeper into each type of owner of Royalty Pharma, beginning with the chart below.
NasdaqGS:RPRX Ownership Breakdown December 24th 2024
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.
As you can see, institutional investors have a fair amount of stake in Royalty 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 Royalty Pharma’s historic earnings and revenue below, but keep in mind there’s always more to the story.
NasdaqGS:RPRX Earnings and Revenue Growth December 24th 2024
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don’t have a meaningful investment in Royalty Pharma. Mario Giuliani is currently the largest shareholder, with 12% of shares outstanding. With 8.5% and 7.6% of the shares outstanding respectively, The Vanguard Group, Inc. and Morgan Stanley Investment Management Inc. are the second and third largest shareholders. Additionally, the company’s CEO Pablo Legorreta directly holds 0.8% of the total shares outstanding.
We did some more digging and found that 10 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.
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.
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.
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 information suggests that insiders maintain a significant holding in Royalty Pharma plc. Insiders own US$2.0b worth of shares in the US$15b company. That’s quite meaningful. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.
The general public– including retail investors — own 14% 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.
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 3 warning signs for Royalty Pharma that you should be aware of.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this freereport 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.
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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.
