Private equity firms who hold 43% of Terns Pharmaceuticals, Inc. (NASDAQ:TERN) gained 15%, institutions profited as well
- Private Equity
- December 30, 2022
- No Comment
- Significant control over Terns Pharmaceuticals by vc/pe firms implies that this group likely has considerable sway over management and governance-related decisions
- The top 5 shareholders own 54% of the company
- own 41% of Terns Pharmaceuticals
If you want to know who really controls Terns Pharmaceuticals, Inc. (NASDAQ:TERN), then you’ll have to look at the makeup of its share registry. We can see that private equity firms own the lion’s share in the company with 43% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
Following a 15% increase in the stock price last week, private equity firms profited the most, but institutions who own 41% stock also stood to gain from the increase.
In the chart below, we zoom in on the different ownership groups of Terns Pharmaceuticals.
See 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.
As you can see, institutional investors have a fair amount of stake in Terns 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. When multiple institutions own a stock, there’s always a risk that they are in a ‘crowded trade’. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Terns Pharmaceuticals’ historic earnings and revenue below, but keep in mind there’s always more to the story.
Our data indicates that hedge funds own 5.8% of Terns Pharmaceuticals. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. The company’s largest shareholder is OrbiMed Advisors LLC, with ownership of 15%. With 13% and 11% of the shares outstanding respectively, Vivo Capital, LLC and FMR LLC are the second and third largest shareholders.
On looking further, we found that 54% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of 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 Terns Pharmaceuticals
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 information suggests that Terns Pharmaceuticals, Inc. insiders own under 1% of the company. It seems the board members have no more than US$218k worth of shares in the US$471m company. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.
General Public Ownership
The general public– including retail investors — own 11% stake in the company, and hence can’t easily be ignored. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Equity Ownership
With a stake of 43%, private equity firms could influence the Terns Pharmaceuticals board. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and — as the name suggests — don’t invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.
It’s always worth thinking about the different groups who own shares in a company. But to understand Terns Pharmaceuticals better, we need to consider many other factors. For instance, we’ve identified 4 warning signs for Terns Pharmaceuticals (3 don’t sit too well with us) that you should be aware of.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.
Valuation is complex, but we’re helping make it simple.
Find out whether Terns Pharmaceuticals is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
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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.