Key Insights

• Given the large stake in the stock by institutions, Schrödinger's stock price might be vulnerable to their trading decisions
• The top 10 shareholders own 51% of the company
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

A look at the shareholders of Schrödinger, Inc. (NASDAQ:SDGR) can tell us which group is most powerful. The group holding the most number of shares in the company, around 79% 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.

And institutional investors endured the highest losses after the company's share price fell by 3.5% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 4.6% might not go down well especially with this category of shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the decline continues, institutional investors may be pressured to sell Schrödinger which might hurt individual investors.

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

What Does The Institutional Ownership Tell Us About Schrödinger?

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.

We can see that Schrödinger does have institutional investors; and they hold a good portion of the company's stock. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Schrödinger, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Schrödinger is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is BlackRock, Inc. with 12% of shares outstanding. In comparison, the second and third largest shareholders hold about 9.7% and 9.4% of the stock.

We did some more digging and found that 10 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Schrödinger

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

We can report that insiders do own shares in Schrödinger, Inc.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around US$37m worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 18% stake in Schrödinger. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Schrödinger better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Schrödinger you should be aware of, and 1 of them is a bit concerning.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.

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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.