Key Insights

• Given the large stake in the stock by institutions, Recursion Pharmaceuticals' stock price might be vulnerable to their trading decisions
• A total of 11 investors have a majority stake in the company with 50% ownership
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

To get a sense of who is truly in control of Recursion Pharmaceuticals, Inc. (NASDAQ:RXRX), it is important to understand the ownership structure of the business. With 66% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, institutional investors endured the highest losses last week after market cap fell by US$130m. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 24% might not go down well especially with this category of shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell Recursion Pharmaceuticals which might hurt individual investors.

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

View our latest analysis for Recursion Pharmaceuticals

What Does The Institutional Ownership Tell Us About Recursion Pharmaceuticals?

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

As you can see, institutional investors have a fair amount of stake in Recursion Pharmaceuticals. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Recursion Pharmaceuticals' historic earnings and revenue below, but keep in mind there's always more to the story.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Recursion Pharmaceuticals is not owned by hedge funds. ARK Investment Management LLC is currently the largest shareholder, with 8.3% of shares outstanding. Baillie Gifford & Co. is the second largest shareholder owning 6.4% of common stock, and The Vanguard Group, Inc. holds about 6.2% of the company stock. In addition, we found that Christopher Gibson, the CEO has 1.8% of the shares allocated to their name.

A closer look at our ownership figures suggests that the top 11 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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 Recursion Pharmaceuticals

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

We can report that insiders do own shares in Recursion Pharmaceuticals, Inc.. This is a big company, so it is good to see this level of alignment. Insiders own US$141m worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 29% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Recursion Pharmaceuticals better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Recursion Pharmaceuticals (at least 2 which don't sit too well with us) , and understanding them should be part of your investment process.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.