What Kind Of Investors Own Most Of Kala Pharmaceuticals, Inc. (NASDAQ:KALA)?

Every investor in Kala Pharmaceuticals, Inc. (NASDAQ:KALA) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Companies that have been privatized tend to have low insider ownership.

Kala Pharmaceuticals is not a large company by global standards. It has a market capitalization of US$445m, which means it wouldn't have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about Kala Pharmaceuticals.

Check out our latest analysis for Kala Pharmaceuticals

What Does The Institutional Ownership Tell Us About Kala 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.

We can see that Kala Pharmaceuticals 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 Kala 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 Kala Pharmaceuticals. Looking at our data, we can see that the largest shareholder is RA Capital Management, L.P. with 19% of shares outstanding. The second and third largest shareholders are Longitude Capital Management Co., LLC and OrbiMed Advisors LLC, with an equal amount of shares to their name at 9.7%.

Our research also brought to light the fact that roughly 53% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.

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 Kala Pharmaceuticals

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.

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.

I can report that insiders do own shares in Kala Pharmaceuticals, Inc.. As individuals, the insiders collectively own US$6.6m worth of the US$445m 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

The general public holds a 11% stake in Kala 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 a stake of 39%, private equity firms could influence the Kala Pharmaceuticals board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Kala Pharmaceuticals better, we need to consider many other factors. For example, we've discovered 3 warning signs for Kala Pharmaceuticals (1 is concerning!) that you should be aware of before investing here.

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.

This article by Simply Wall St is general in nature. 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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