Key Insights

• Lexicon Pharmaceuticals' significant private equity firms ownership suggests that the key decisions are influenced by shareholders from the larger public
• The top 2 shareholders own 62% of the company
• Institutional ownership in Lexicon Pharmaceuticals is 33%

Every investor in Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) should be aware of the most powerful shareholder groups. With 48% stake, private equity firms possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While institutions, who own 33% shares weren't spared from last week's US$77m market cap drop, private equity firms as a group suffered the maximum losses

Let's delve deeper into each type of owner of Lexicon Pharmaceuticals, beginning with the chart below.

What Does The Institutional Ownership Tell Us About Lexicon Pharmaceuticals?

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.

Lexicon Pharmaceuticals 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. 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 Lexicon Pharmaceuticals' earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in Lexicon Pharmaceuticals. Our data shows that Artal Group S.A. is the largest shareholder with 48% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 14% and 3.0%, of the shares outstanding, respectively.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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 Lexicon Pharmaceuticals

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 most recent data indicates that insiders own some shares in Lexicon Pharmaceuticals, Inc.. As individuals, the insiders collectively own US$3.1m worth of the US$265m company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 17% 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 an ownership of 48%, 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Lexicon Pharmaceuticals better, we need to consider many other factors. Be aware that Lexicon Pharmaceuticals is showing 4 warning signs in our investment analysis , and 1 of those is 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.

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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.