Key Insights

• The considerable ownership by private equity firms in Lexicon Pharmaceuticals indicates that they collectively have a greater say in management and business strategy
• The top 2 shareholders own 59% of the company
• Institutions own 28% of Lexicon Pharmaceuticals

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Every investor in Lexicon Pharmaceuticals, Inc. (NASDAQ:LXRX) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are private equity firms with 48% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While private equity firms were the group that benefitted the most from last week’s US$83m market cap gain, institutions too had a 28% share in those profits.

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

See our latest analysis for Lexicon Pharmaceuticals

What Does The Institutional Ownership Tell Us About Lexicon Pharmaceuticals?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Lexicon Pharmaceuticals already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Lexicon Pharmaceuticals, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Lexicon Pharmaceuticals. Artal Group S.A. is currently the company's largest shareholder with 48% of shares outstanding. FMR LLC is the second largest shareholder owning 11% of common stock, and BlackRock, Inc. holds about 2.8% of the company stock.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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 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 Lexicon 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.

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 see that insiders own shares in Lexicon Pharmaceuticals, Inc.. As individuals, the insiders collectively own US$4.7m worth of the US$389m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 23% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Lexicon 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

Private equity firms hold a 48% stake in Lexicon Pharmaceuticals. This suggests they can be influential in key policy decisions. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Lexicon Pharmaceuticals better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Lexicon Pharmaceuticals (including 1 which doesn't sit too well with us) .

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.