Institutional investors in Cabaletta Bio, Inc. (NASDAQ:CABA) lost 18% last week but have reaped the benefits of longer-term growth

Key Insights

• Significantly high institutional ownership implies Cabaletta Bio's stock price is sensitive to their trading actions

• The top 10 shareholders own 52% of the company

• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

If you want to know who really controls Cabaletta Bio, Inc. (NASDAQ:CABA), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 49% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Institutional investors endured the highest losses after the company's market cap fell by US$15m last week. However, the 741% one-year return to shareholders might have softened the blow. But they would probably be wary of future losses.

In the chart below, we zoom in on the different ownership groups of Cabaletta Bio.

See our latest analysis for Cabaletta Bio

What Does The Institutional Ownership Tell Us About Cabaletta Bio?

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.

We can see that Cabaletta Bio does have institutional investors; and they hold a good portion of the company's stock. 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 Cabaletta Bio's earnings history below. Of course, the future is what really matters.

Our data indicates that hedge funds own 13% of Cabaletta Bio. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Fred Alger Management, LLC is currently the company's largest shareholder with 10% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 6.6% and 6.4%, of the shares outstanding, respectively. Additionally, the company's CEO Steven Nichtberger directly holds 3.5% of the total shares outstanding.

We also observed that the top 10 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Cabaletta Bio

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Shareholders would probably be interested to learn that insiders own shares in Cabaletta Bio, Inc.. In their own names, insiders own US$17m worth of stock in the US$427m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

With a 27% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Cabaletta Bio. 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 5.0% stake in Cabaletta Bio. This suggests they can be influential in key policy decisions. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Cabaletta Bio (at least 1 which doesn't sit too well with us) , 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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