Institutional owners may consider drastic measures as Seres Therapeutics, Inc.’s (NASDAQ:MCRB) recent $13 million drop adds to long-term losses

Key ideas

• The high institutional ownership implies that Seres Therapeutics’ stock price is sensitive to their trading actions
• The 8 main shareholders own 50% of the company
• By using analyst forecast data as well as ownership research, one can better assess a company’s future performance.

A look at Seres Therapeutics, Inc. (NASDAQ:MCRB) shareholders can tell us which group is the most powerful. And the group that holds the largest piece of the pie is institutions, with 41% of the share. In other words, the group that stands to benefit the most from a rising share price (or lose the most from a falling share price).

Institutional investors suffered the biggest losses after the company’s stock price fell 11% last week. These investors may be particularly concerned about the current loss, which comes on top of an 85% loss over the past year for shareholders. Also known as “intelligent investors,” institutions have a large influence on the price performance of a stock. Therefore, if the downtrend continues, institutions could be pushed to sell Seres Therapeutics, which could have negative consequences for individual investors.

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

Check out our latest analysis for Seres Therapeutics

What does institutional ownership tell us about Seres Therapeutics?

Many institutions measure their performance against an index that approximates the local market, so they typically pay more attention to companies included in major indices.

We can see that Seres Therapeutics does have institutional investors, and they hold a fair chunk of the company’s shares. This implies that the analysts working for these institutions have looked at the stock and like it. But like anyone, they can be wrong. It’s not uncommon to see the share price drop significantly if two large institutional investors try to sell out of a stock at the same time. So it’s worth checking out Seres Therapeutics’ past earnings trajectory (below). Of course, keep in mind that there are other factors to consider as well.

We note that hedge funds do not have a significant investment in Seres Therapeutics. Flagship Pioneering, Inc is currently the largest shareholder, with 15% of the shares outstanding. FMR LLC is the second largest shareholder holding 15% of the common stock, and Nestlé SA holds approximately 4.9% of the company’s shares.

We did some further research and found that 8 of the major shareholders represent around 50% of the register, which implies that alongside the larger shareholders there are a few smaller shareholders, thus balancing out everyone’s interests somewhat.

While it is a good idea to study institutional ownership data for a company, it is also a good idea to study analyst sentiments to get a feel for which way the wind is blowing. There is a reasonable number of analysts covering the stock, so it can be useful to know their aggregate view on the future.

Internal property of Seres Therapeutics

The definition of corporate insiders can be subjective and varies across jurisdictions. Our data reflects individual insiders, including at a minimum board members. Company management is accountable to the board of directors, and the board is expected to represent the interests of shareholders. In particular, senior executives may also sit on the board of directors.

Generally speaking, I consider insider ownership to be a good thing. However, in some cases it makes it harder for other shareholders to hold the board to account.

Our most recent data indicates that insiders own less than 1% of Seres Therapeutics, Inc. It appears that board members own no more than US$884k worth of shares in this US$106m company. We generally like to see a more invested board. However, it might be worth checking if these insiders have been buying.

General public property

The general public, including retail investors, owns 38% of the company’s shares and cannot be easily ignored. This size of stake, while considerable, may not be enough to change the company’s policy if the decision is not in line with that of other large shareholders.

Private Equity Property

Private equity firms hold a 15% stake in Seres Therapeutics. That suggests they can influence key policy decisions. Some might like that, because private equity firms are sometimes activists who hold executives to account. But sometimes private equity firms sell, after taking the company public.

Ownership of public companies

Listed companies currently hold 4.9% of Seres Therapeutics shares. We can’t be certain, but it’s entirely possible that this is a strategic holding. The companies may be similar or work together.

Next steps:

It’s always useful to think about the different groups that own shares in a company. But to better understand Seres Therapeutics, we need to consider many other factors. Consider, for example, the ever-present specter of investment risk. We have identified 4 warning signs with Seres Therapeutics (at least 2 that are a bit concerning), and understanding them should be part of your investment process.

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 using only unbiased methodology and our articles are not intended to constitute financial advice. This 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 provide you with focused, long-term analysis based on fundamental data. Please note that our analysis may not factor in the latest price-sensitive company announcements or qualitative information. Simply Wall St has no position in any of the stocks mentioned.

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