Home Hedge Funds Otonomy, Inc. (NASDAQ:OTIC) surges 11%; individual investors who own 32% shares profited...

Otonomy, Inc. (NASDAQ:OTIC) surges 11%; individual investors who own 32% shares profited along with institutions

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NasdaqGS:OTIC

A look at the shareholders of Otonomy, Inc. (NASDAQ:OTIC) can tell us which group is most powerful. The group holding the most number of shares in the company, around 32% to be precise, is individual investors. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While individual investors were the group that benefitted the most from last week’s US$11m market cap gain, institutions too had a 30% share in those profits.

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

View our latest analysis for Otonomy

ownership-breakdown
NasdaqGS:OTIC Ownership Breakdown June 25th 2022

What Does The Institutional Ownership Tell Us About Otonomy?

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.

Otonomy already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Otonomy’s historic earnings and revenue below, but keep in mind there’s always more to the story.

earnings-and-revenue-growth
NasdaqGS:OTIC Earnings and Revenue Growth June 25th 2022

Our data indicates that hedge funds own 28% of Otonomy. 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. Looking at our data, we can see that the largest shareholder is Baker Bros. Advisors LP with 14% of shares outstanding. With 9.8% and 8.8% of the shares outstanding respectively, RA Capital Management, L.P. and Adage Capital Management, L.P. are the second and third largest shareholders.

We did some more digging and found that 7 of the top shareholders account for roughly 52% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 Otonomy

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.

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.

Our information suggests that Otonomy, Inc. insiders own under 1% of the company. It appears that the board holds about US$544k worth of stock. This compares to a market capitalization of US$115m. 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– including retail investors — own 32% 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

Private equity firms hold a 9.8% stake in Otonomy. This suggests they can be influential in key policy decisions. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example – Otonomy has 3 warning signs (and 1 which is a bit concerning) we think you should know about.

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.

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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