Home Hedge Funds Hedge funds investors control 46% of La Jolla Pharmaceutical Company (NASDAQ:LJPC) and...

Hedge funds investors control 46% of La Jolla Pharmaceutical Company (NASDAQ:LJPC) and were rewarded last week after stock increased 16%

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NasdaqCM:LJPC

To get a sense of who is truly in control of La Jolla Pharmaceutical Company (NASDAQ:LJPC), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 46% to be precise, is hedge funds. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And last week, hedge funds investors ended up benefitting the most after the company hit US$108m in market cap. The one-year return on investment is currently 15% and last week’s gain would have been more than welcomed.

In the chart below, we zoom in on the different ownership groups of La Jolla Pharmaceutical.

View our latest analysis for La Jolla Pharmaceutical

ownership-breakdown
NasdaqCM:LJPC Ownership Breakdown May 18th 2022

What Does The Institutional Ownership Tell Us About La Jolla Pharmaceutical?

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 La Jolla Pharmaceutical. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It’s therefore worth looking at La Jolla Pharmaceutical’s earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
NasdaqCM:LJPC Earnings and Revenue Growth May 18th 2022

Our data indicates that hedge funds own 46% of La Jolla Pharmaceutical. 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 Tang Capital Management, LLC is the largest shareholder with 37% of shares outstanding. With 9.0% and 3.2% of the shares outstanding respectively, RTW Investments, LP and The Vanguard Group, Inc. are the second and third largest shareholders.

To make our study more interesting, we found that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company’s decision-making.

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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of La Jolla Pharmaceutical

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 data suggests that insiders own under 1% of La Jolla Pharmaceutical Company in their own names. It appears that the board holds about US$507k worth of stock. This compares to a market capitalization of US$108m. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.

General Public Ownership

With a 32% ownership, the general public, mostly comprising of individual investors, have some degree of sway over La Jolla Pharmaceutical. 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. Take risks for example – La Jolla Pharmaceutical has 3 warning signs (and 2 which are potentially serious) we think you should know about.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

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.

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