Key Insights

• Institutions' substantial holdings in Erasca implies that they have significant influence over the company's share price
• The top 11 shareholders own 53% of the company
• 12% of Erasca is held by insiders

A look at the shareholders of Erasca, Inc. (NASDAQ:ERAS) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are institutions with 62% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And things are looking up for institutional investors after the company gained US$65m in market cap last week. One-year return to shareholders is currently 21% and last week's gain was the icing on the cake.

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

What Does The Institutional Ownership Tell Us About Erasca?

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.

Erasca already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Erasca's earnings history below. Of course, the future is what really matters.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in Erasca. Looking at our data, we can see that the largest shareholder is the CEO Jonathan Lim with 11% of shares outstanding. The second and third largest shareholders are VR Adviser, LLC and Frazier Life Sciences Management, LP, with an equal amount of shares to their name at 5.7%.

After doing some more digging, we found that the top 11 have the combined ownership of 53% in the company, suggesting that no single shareholder has significant control over the company.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Erasca

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.

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 most recent data indicates that insiders own a reasonable proportion of Erasca, Inc.. Insiders own US$92m worth of shares in the US$768m company. 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, who are usually individual investors, hold a 14% stake in Erasca. 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

Private equity firms hold a 11% stake in Erasca. This suggests they can be influential in key policy decisions. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Erasca better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Erasca (at least 3 which are a bit concerning) , 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.