Connect Biopharma Holdings Limited (NASDAQ:CNTB) surges 16%; private equity firms who own 39% shares profited along with insiders

Key Insights

• Significant control over Connect Biopharma Holdings by private equity firms implies that the general public has more power to influence management and governance-related decisions
• 53% of the business is held by the top 4 shareholders
• Insiders own 22% of Connect Biopharma Holdings

Every investor in Connect Biopharma Holdings Limited (NASDAQ:CNTB) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are private equity firms with 39% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While private equity firms were the group that reaped the most benefits after last week’s 16% price gain, insiders also received a 22% cut.

In the chart below, we zoom in on the different ownership groups of Connect Biopharma Holdings.

View our latest analysis for Connect Biopharma Holdings

What Does The Institutional Ownership Tell Us About Connect Biopharma Holdings?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that Connect Biopharma Holdings does have institutional investors; and they hold a good portion of the company’s stock. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Connect Biopharma Holdings, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don’t have a meaningful investment in Connect Biopharma Holdings. Panacea Venture Management Co., Ltd. is currently the largest shareholder, with 22% of shares outstanding. With 11% and 11% of the shares outstanding respectively, Wubin Pan and Zheng Wei are the second and third largest shareholders. Note that the second and third-largest shareholders are also President and Member of the Board of Directors, respectively, meaning that the company’s top shareholders are insiders.

On looking further, we found that 53% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Connect Biopharma Holdings

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 insiders maintain a significant holding in Connect Biopharma Holdings Limited. It has a market capitalization of just US$108m, and insiders have US$24m 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

The general public– including retail investors — own 16% stake in the company, and hence can’t easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Equity Ownership

With a stake of 39%, private equity firms could influence the Connect Biopharma Holdings 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 9.6%, of the shares on issue. It’s hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private 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. Take risks for example – Connect Biopharma Holdings has 4 warning signs (and 3 which can’t be ignored) we think you should know about.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.