Every investor in Terns Pharmaceuticals, Inc. (NASDAQ:TERN) should be aware of the most powerful shareholder groups. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Companies that have been privatized tend to have low insider ownership.

With a market capitalization of US$465m, Terns Pharmaceuticals is a small cap stock, so it might not be well known by many institutional investors. In the chart below, we can see that institutions own shares in the company. We can zoom in on the different ownership groups, to learn more about Terns Pharmaceuticals.

View our latest analysis for Terns Pharmaceuticals

What Does The Institutional Ownership Tell Us About Terns Pharmaceuticals?

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 Terns Pharmaceuticals 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. 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 Terns Pharmaceuticals, (below). Of course, keep in mind that there are other factors to consider, too.

It would appear that 9.5% of Terns Pharmaceuticals shares are controlled by hedge funds. 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. The company's largest shareholder is Eli Lilly Investment Consulting (Shanghai) Co., Ltd., with ownership of 19%. Meanwhile, the second and third largest shareholders, hold 15% and 11%, of the shares outstanding, respectively.

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.

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 is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Terns Pharmaceuticals

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

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.

I can report that insiders do own shares in Terns Pharmaceuticals, Inc.. As individuals, the insiders collectively own US$5.3m worth of the US$465m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public holds a 24% stake in Terns Pharmaceuticals. 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 an ownership of 50%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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. For instance, we've identified 2 warning signs for Terns Pharmaceuticals that you should be aware of.

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. 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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