Key Insights

• Given the large stake in the stock by institutions, Pacific Biosciences of California's stock price might be vulnerable to their trading decisions
• A total of 7 investors have a majority stake in the company with 53% ownership
• Insiders have been selling lately

Every investor in Pacific Biosciences of California, Inc. (NASDAQ:PACB) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 86% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors would appreciate the 14% increase in share price last week, given their one-year losses have totalled a disappointing 85%.

Let's delve deeper into each type of owner of Pacific Biosciences of California, beginning with the chart below.

What Does The Institutional Ownership Tell Us About Pacific Biosciences of California?

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 Pacific Biosciences of California. 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. 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 Pacific Biosciences of California, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Pacific Biosciences of California. Looking at our data, we can see that the largest shareholder is ARK Investment Management LLC with 12% of shares outstanding. The Vanguard Group, Inc. is the second largest shareholder owning 9.5% of common stock, and BlackRock, Inc. holds about 8.7% of the company stock.

We did some more digging and found that 7 of the top shareholders account for roughly 53% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Pacific Biosciences of California

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 most recent data indicates that insiders own less than 1% of Pacific Biosciences of California, Inc.. It appears that the board holds about US$2.2m worth of stock. This compares to a market capitalization of US$406m. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 13% stake in Pacific Biosciences of California. 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.

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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Pacific Biosciences of California (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.

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.

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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.