Home Hedge Funds Alvotech’s (NASDAQ:ALVO) stock price dropped 17% last week; private equity firms would...

Alvotech’s (NASDAQ:ALVO) stock price dropped 17% last week; private equity firms would not be happy

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To get a sense of who is truly in control of Alvotech (NASDAQ:ALVO), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 41% to be precise, is private equity firms. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private equity firms as a group endured the highest losses last week after market cap fell by US$343m.

Let’s delve deeper into each type of owner of Alvotech, beginning with the chart below.

However if you’d rather see where the opportunities and risks are within ALVO’s industry, you can check out our analysis on the US Biotechs industry.

ownership-breakdown
NasdaqGM:ALVO Ownership Breakdown September 23rd 2022

What Does The Institutional Ownership Tell Us About Alvotech?

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.

As you can see, institutional investors have a fair amount of stake in Alvotech. 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. 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 Alvotech’s earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
NasdaqGM:ALVO Earnings and Revenue Growth September 23rd 2022

Alvotech is not owned by hedge funds. The company’s largest shareholder is Aztiq Pharma Partners S.à R.L., with ownership of 41%. Celtic Holdings S.C.A. is the second largest shareholder owning 30% of common stock, and Brookfield Asset Management Inc. holds about 2.8% of the company stock.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company’s shares, implying that they have considerable power to influence the company’s decisions.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Alvotech

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 Alvotech insiders own under 1% of the company. However, it’s possible that insiders might have an indirect interest through a more complex structure. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around US$7.3m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public– including retail investors — own 21% stake in the company, and hence can’t easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Equity Ownership

With a stake of 41%, private equity firms could influence the Alvotech board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

We can see that Private Companies own 30%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

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 4 warning signs for Alvotech you should be aware of, and 2 of them are a bit concerning.

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.

Valuation is complex, but we’re helping make it simple.

Find out whether Alvotech is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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