Institutional owners may consider drastic action as Foghorn Therapeutics Inc.’s (NASDAQ:FHTX) recent $42 million decline adds to long-term losses.

Key ideas

• Given the significant institutional ownership in the stock, Foghorn Therapeutics’ stock price could be vulnerable to their business decisions.
• The top 5 shareholders own 53% of the company
• By using analyst forecast data as well as ownership research, one can better assess a company’s future performance.

To get an idea of ​​who really controls Foghorn Therapeutics Inc. (NASDAQ: FHTX), it’s important to understand the company’s ownership structure. The group holding the largest number of shares in the company, around 35% to be precise, are institutions. In other words, the group will benefit the most if the stock rises (or lose the most if the stock goes down).

And institutional investors suffered the biggest losses after the company’s stock price fell 13% last week. The recent loss, which comes on top of a 41% year-over-year loss for shareholders, may not please this group of investors. Often referred to as “market participants,” institutions wield significant power to influence the price dynamics of any stock. Therefore, if the downtrend continues, institutions could face pressure to sell Foghorn Therapeutics, which could have negative implications for individual investors.

Let’s take a closer look at each Foghorn Therapeutics owner type, starting with the table below.

Check out our latest analysis for Foghorn Therapeutics

What does institutional ownership tell us about Foghorn Therapeutics?

Institutional investors typically compare their own returns to those of a commonly followed index. They therefore generally consider buying larger companies included in the relevant benchmark index.

As you can see, institutional investors own a significant stake in Foghorn Therapeutics. This may indicate that the company has a certain degree of credibility with the investment community. However, it is best to be wary of the supposed validation provided by institutional investors. They, too, are sometimes wrong. If multiple institutions change their views on a stock at the same time, the stock price could fall quickly. So it’s worth taking a look at Foghorn Therapeutics’s earnings history below. Of course, it’s the future that really matters.

Our data indicates that hedge funds own 5.3% of Foghorn Therapeutics. This catches my attention because hedge funds sometimes try to influence management or make changes that will create short-term value for shareholders. Looking at our data, we can see that the largest shareholder is Flagship Pioneering, Inc with 23% of the shares outstanding. FMR LLC is the second largest shareholder with 11% of the common stock, and Eli Lilly and Company owns approximately 7.2% of the company’s stock. Additionally, CEO Adrian H. Gottschalk owns 0.9% of the company’s shares.

Our research also highlighted that approximately 53% of the company is controlled by the top five shareholders, suggesting that these owners have significant influence over the company.

While it makes sense to study data on institutional ownership of a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Many analysts cover the stock, so you can look at growth forecasts quite easily.

Insider ownership of Foghorn 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.

Internal ownership is positive when it indicates that management thinks like the true owners of the company. However, strong internal ownership can also give immense power to a small group within the company. This can be negative in certain circumstances.

Our most recent data indicates that insiders own some shares of Foghorn Therapeutics Inc.. The company has a market cap of just US$310m, and insiders own US$25m worth of stock, in their own names. It’s good to see investment from insiders, but it might be worth checking to see if those insiders have been buying.

General public property

With a 21% stake, the general public, consisting mainly of individual investors, has some influence over Foghorn Therapeutics. While this size of ownership may not be enough to sway a policy decision in their favor, they can still have a collective impact on company policies.

Private Equity Ownership

With a 23% stake, private equity firms are able to play a role in shaping corporate strategy with a focus on value creation. This might appeal to some, because private equity is sometimes an activist in holding management accountable. But other times, private equity sells itself, after taking the company public.

Public company ownership

It appears to us that public companies own 7.2% of Foghorn Therapeutics. This may be a strategic interest and the two companies may have related business interests. They might have merged. This exploitation probably deserves further investigation.

Next steps:

It’s always helpful to think about the different groups that own shares in a company. But to better understand Foghorn Therapeutics, we need to consider many other factors. Please note that Foghorn Therapeutics displays 4 warning signs in our investment analysis and one of them is a bit worrying…

If you’re like me, you might want to think about whether this business will grow or shrink. Luckily, you can check out this free report showing analyst forecasts for its future.

NB: The figures in this article are calculated using data for the last twelve months, which refers to the 12 month period ending on the last day of the month in which the financial statements are dated. This may not be consistent with the annual report figures for the entire 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 does not constitute a recommendation to buy or sell shares and does not take into account your objectives or your financial situation. Our goal is to provide you with targeted, long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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