Reneo Pharmaceuticals, Inc.'s (NASDAQ:RPHM) largest shareholders are private equity firms who were rewarded as market cap surged US$33m last week

Key Insights

• The considerable ownership by private equity firms in Reneo Pharmaceuticals indicates that they collectively have a greater say in management and business strategy

• 52% of the business is held by the top 4 shareholders

• 15% of Reneo Pharmaceuticals is held by Institutions

If you want to know who really controls Reneo Pharmaceuticals, Inc. (NASDAQ:RPHM), 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 60% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, private equity firms collectively scored the highest last week as the company hit US$105m market cap following a 46% gain in the stock.

In the chart below, we zoom in on the different ownership groups of Reneo Pharmaceuticals.

See our latest analysis for Reneo Pharmaceuticals

What Does The Institutional Ownership Tell Us About Reneo Pharmaceuticals?

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 Reneo Pharmaceuticals does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Reneo Pharmaceuticals' earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Reneo Pharmaceuticals. New Enterprise Associates, Inc. is currently the company's largest shareholder with 20% of shares outstanding. For context, the second largest shareholder holds about 14% of the shares outstanding, followed by an ownership of 9.8% by the third-largest shareholder.

On looking further, we found that 52% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Reneo Pharmaceuticals

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Shareholders would probably be interested to learn that insiders own shares in Reneo Pharmaceuticals, Inc.. In their own names, insiders own US$2.6m worth of stock in the US$105m company. It is good to see some investment by insiders, but we usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 22% stake in Reneo Pharmaceuticals. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Equity Ownership

With an ownership of 60%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Take risks for example - Reneo Pharmaceuticals has 3 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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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