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Heron Therapeutics, Inc.'s (NASDAQ:HRTX) recent 11% pullback adds to one-year year losses, institutional owners may take drastic measures

Key Insights

  • Institutions' substantial holdings in Heron Therapeutics implies that they have significant influence over the company's share price

  • 52% of the business is held by the top 7 shareholders

  • Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

If you want to know who really controls Heron Therapeutics, Inc. (NASDAQ:HRTX), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 63% 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).

And institutional investors endured the highest losses after the company's share price fell by 11% last week. The recent loss, which adds to a one-year loss of 72% for stockholders, may not sit well with this group of investors. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. Hence, if weakness in Heron Therapeutics' share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

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

Check out our latest analysis for Heron Therapeutics

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About Heron Therapeutics?

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 Heron Therapeutics does have institutional investors; and they hold a good portion of the company's stock. 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 Heron Therapeutics' historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
earnings-and-revenue-growth

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. It looks like hedge funds own 25% of Heron Therapeutics shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Looking at our data, we can see that the largest shareholder is Rubric Capital Management LP with 19% of shares outstanding. The second and third largest shareholders are The Vanguard Group, Inc. and BlackRock, Inc., with an equal amount of shares to their name at 6.0%.

On further inspection, we found that more than half the company's shares are owned by the top 7 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 Heron Therapeutics

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 information suggests that Heron Therapeutics, Inc. insiders own under 1% of the company. It appears that the board holds about US$1.5m worth of stock. This compares to a market capitalization of US$213m. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.

General Public Ownership

The general public, who are usually individual investors, hold a 11% stake in Heron Therapeutics. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

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. Be aware that Heron Therapeutics is showing 4 warning signs in our investment analysis , and 1 of those can't be ignored...

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.

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.