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June 17, 2024
PI Global Investments
Hedge Funds

Hedge funds investors may adopt severe steps after Prelude Therapeutics Incorporated’s (NASDAQ:PRLD) latest 15% drop adds to a year losses

Key Insights

  • Significantly high institutional ownership implies Prelude Therapeutics’ stock price is sensitive to their trading actions
  • A total of 2 investors have a majority stake in the company with 54% ownership
  • Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

Every investor in Prelude Therapeutics Incorporated (NASDAQ:PRLD) should be aware of the most powerful shareholder groups. With 33% stake, hedge funds possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And hedge funds investors saw their holdings value drop by 15% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 44% for shareholders. Generally speaking, hedge funds are quite aggressively managed, and are usually looking to maximize short-term returns. Given their high ownership in Prelude Therapeutics, they wield significant power and continued under performance can lead to them influencing management decisions which might not be evaluating the company’s long-term prospects.

Let’s take a closer look to see what the different types of shareholders can tell us about Prelude Therapeutics.

See our latest analysis for Prelude Therapeutics

NasdaqGS:PRLD Ownership Breakdown January 17th 2024

What Does The Institutional Ownership Tell Us About Prelude Therapeutics?

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.

As you can see, institutional investors have a fair amount of stake in Prelude Therapeutics. 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. 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 Prelude Therapeutics, (below). Of course, keep in mind that there are other factors to consider, too.

NasdaqGS:PRLD Earnings and Revenue Growth January 17th 2024

It looks like hedge funds own 33% of Prelude Therapeutics shares. That’s interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Our data shows that Baker Bros. Advisors LP is the largest shareholder with 28% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 26% and 5.1%, of the shares outstanding, respectively. In addition, we found that Krishna Vaddi, the CEO has 3.4% of the shares allocated to their name.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Prelude Therapeutics

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.

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 see that insiders own shares in Prelude Therapeutics Incorporated. As individuals, the insiders collectively own US$12m worth of the US$237m 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, who are usually individual investors, hold a 18% stake in Prelude Therapeutics. 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 26%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we’ve identified 5 warning signs for Prelude Therapeutics (2 are significant) that you should be aware of.

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.

Valuation is complex, but we’re helping make it simple.

Find out whether Prelude Therapeutics is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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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