Key Insights

• Given the large stake in the stock by institutions, Catalyst Pharmaceuticals' stock price might be vulnerable to their trading decisions
• The top 10 shareholders own 50% of the company
• Insiders have been selling lately

To get a sense of who is truly in control of Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 74% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 6.2% in value last week. However, the 38% one-year return to shareholders may have helped lessen their pain. But they would probably be wary of future losses.

Let's take a closer look to see what the different types of shareholders can tell us about Catalyst Pharmaceuticals.

What Does The Institutional Ownership Tell Us About Catalyst Pharmaceuticals?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that Catalyst Pharmaceuticals 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 Catalyst Pharmaceuticals, (below). Of course, keep in mind that there are other factors to consider, too.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Our data indicates that hedge funds own 7.7% of Catalyst Pharmaceuticals. 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. Our data shows that BlackRock, Inc. is the largest shareholder with 15% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.7% and 6.9% of the stock.

We also observed that the top 10 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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 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 Catalyst Pharmaceuticals

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 report that insiders do own shares in Catalyst Pharmaceuticals, Inc.. The insiders have a meaningful stake worth US$115m. Most would see this as a real positive. It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 12% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Catalyst Pharmaceuticals. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 3 warning signs for Catalyst Pharmaceuticals 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.