Key Insights

• Given the large stake in the stock by institutions, Avadel Pharmaceuticals' stock price might be vulnerable to their trading decisions
• 51% of the business is held by the top 6 shareholders
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

If you want to know who really controls Avadel Pharmaceuticals plc (NASDAQ:AVDL), then you'll have to look at the makeup of its share registry. With 83% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And last week, institutional endured the biggest losses as the stock fell by 3.9%.

In the chart below, we zoom in on the different ownership groups of Avadel Pharmaceuticals.

What Does The Institutional Ownership Tell Us About Avadel 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.

As you can see, institutional investors have a fair amount of stake in Avadel Pharmaceuticals. 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 Avadel Pharmaceuticals, (below). Of course, keep in mind that there are other factors to consider, too.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. It looks like hedge funds own 6.0% of Avadel Pharmaceuticals shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Our data shows that Janus Henderson Group plc is the largest shareholder with 25% of shares outstanding. For context, the second largest shareholder holds about 6.8% of the shares outstanding, followed by an ownership of 6.0% by the third-largest shareholder.

We also observed that the top 6 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Avadel 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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our data suggests that insiders own under 1% of Avadel Pharmaceuticals plc in their own names. Keep in mind that it's a big company, and the insiders own US$10m worth of shares. The absolute value might be more important than the proportional share. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 10% stake in Avadel Pharmaceuticals. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Avadel Pharmaceuticals better, we need to consider many other factors. Take risks for example - Avadel Pharmaceuticals has 1 warning sign we think you should be aware of.

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.