HLS Therapeutics Inc. (TSE:HLS) has attracted the attention of hedge fund investors who hold a significant 33% stake

Every investor in HLS Therapeutics Inc. (TSE:HLS) should be aware of the most powerful shareholder groups. We see that hedge funds hold the lion’s share in the company with 33% participation. In other words, this is the group that will gain the most (or lose the most) from their investment in the business.

Since hedge fund owners have a huge pool of resources and liquidity, their investment decisions tend to carry a lot of weight, especially with individual investors. As a result, a large institutional sum invested in a company is generally seen as a positive attribute.

In the chart below, we zoom in on the different ownership groups of HLS Therapeutics.

Check out our latest analysis for HLS Therapeutics

What does institutional ownership tell us about HLS Therapeutics?

Institutions typically measure themselves against a benchmark when reporting to their own investors. So they often become more enthusiastic about a stock once it is included in a major index. We expect most companies to have some institutions on the register, especially if they are growing.

We can see that HLS Therapeutics has institutional investors and they own a good portion of the company’s shares. This may indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of the so-called validation that comes with institutional investors. They, too, are sometimes wrong. When multiple institutions own a stock, there’s always a risk that they are in a ‘crowded trade’. When such a trade goes bad, multiple parties may compete to sell shares quickly. This risk is higher in a company without a history of growth. You can see HLS Therapeutics’ historic earnings and revenue below, but keep in mind that there’s always more to the story.

Our data indicates that hedge funds own 33% of HLS Therapeutics. This catches my attention because hedge funds sometimes try to influence management or make changes that will create short-term value for shareholders. Stadium Capital Management, LLC is currently the company’s largest shareholder with 18% of the shares outstanding. In comparison, the second and third largest shareholders own about 15% and 13% of the shares. Additionally, we found that Gilbert Godin, the CEO, owns 2.9% of the shares attributed to his name.

To make our study more interesting, we found that the top four shareholders control more than half of the company, implying that this group has considerable influence over the company’s decision-making.

While studying institutional ownership for a company can add value to your research, it is also a good idea to research analyst recommendations to get a better understand of a stock’s expected performance. Many analysts cover the stock, so it may be interesting to see what they are forecasting as well.

Internally owned by HLS Therapeutics

The definition of an insider may differ slightly between countries, but board members still count. The management of the company answers to the board of directors and the latter must represent the interests of the shareholders. Notably, it sometimes happens that high-level executives themselves sit on the board of directors.

Most people consider insider ownership to be a positive because it can indicate that the board is well aligned with other shareholders. However, sometimes too much power is concentrated within this group.

Shareholders would probably be interested to know that insiders own shares of HLS Therapeutics Inc. The company’s market cap is just CA$285m, and insiders own shares worth CA$9.5 million Canadian dollars, in their own name. It’s good to see some investment from insiders, but it might be worth checking if those insiders have been buying.

General public property

The general public, including retail investors, owns 32% of the company’s shares and therefore cannot be easily ignored. While this group can’t necessarily call the shots, they can certainly have a real influence on how the company is run.

Private Equity Ownership

Private equity firms hold a 13% stake in HLS Therapeutics. This suggests that they can have an influence on key policy decisions. We sometimes see private equity firms going long-term, but generally they have a shorter investment horizon and, as the name suggests, do not invest heavily in listed companies. After a while, they might consider selling and redeploying capital elsewhere.

Next steps:

It’s always helpful to think about the different groups that own shares in a company. But to better understand HLS Therapeutics, we need to consider many other factors. Please note that HLS Therapeutics displays 1 warning sign in our investment analysis you should know…

Eventually the future is the most important. You can access this free report on analysts’ forecasts for the company.

NB: The figures in this article are calculated from the last twelve months data, which refers to the 12-month period ending on the last day of the month in which the financial statement is issued. These figures may not correspond to the figures in the annual report for the full year.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to constitute financial advice. It is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. Our goal is to bring you targeted, long-term analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative information. Simply Wall St has no position in any stocks mentioned.

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