Key Insights

• Institutions' substantial holdings in COMPASS Pathways implies that they have significant influence over the company's share price
• 52% of the business is held by the top 9 shareholders
• Insiders own 15% of COMPASS Pathways

If you want to know who really controls COMPASS Pathways plc (NASDAQ:CMPS), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 29% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

After a year of 52% losses, last week's 27% gain would be welcomed by institutional investors as a possible sign that returns might start trending higher.

Let's delve deeper into each type of owner of COMPASS Pathways, beginning with the chart below.

What Does The Institutional Ownership Tell Us About COMPASS Pathways?

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 COMPASS Pathways. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 COMPASS Pathways' historic earnings and revenue below, but keep in mind there's always more to the story.

It would appear that 13% of COMPASS Pathways shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. The company's largest shareholder is George Goldsmith, with ownership of 11%. With 10% and 7.9% of the shares outstanding respectively, Atai Life Sciences N.V. and Citadel Advisors LLC are the second and third largest shareholders.

We also observed that the top 9 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.

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 COMPASS Pathways

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 COMPASS Pathways plc. It has a market capitalization of just US$304m, and insiders have US$47m worth of shares in their own names. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 25% ownership, the general public, mostly comprising of individual investors, have some degree of sway over COMPASS Pathways. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With an ownership of 5.6%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Public Company Ownership

We can see that public companies hold 10% of the COMPASS Pathways shares on issue. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 4 warning signs for COMPASS Pathways (1 is potentially serious!) that you should be aware of before investing here.

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.

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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.