Insiders of CervoMed Inc. (NASDAQ:CRVO) were rewarded after last week’s 11% gain

Key Insights

• CervoMed's significant insider ownership suggests inherent interests in company's expansion
• The top 6 shareholders own 53% of the company
• Insiders have been buying lately

To get a sense of who is truly in control of CervoMed Inc. (NASDAQ:CRVO), it is important to understand the ownership structure of the business. We can see that individual insiders own the lion's share in the company with 35% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Insiders who purchased recently should be particularly happy after the stock gained 11% in the past week.

Let's take a closer look to see what the different types of shareholders can tell us about CervoMed.

Check out our latest analysis for CervoMed

What Does The Institutional Ownership Tell Us About CervoMed?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that CervoMed 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at CervoMed's earnings history below. Of course, the future is what really matters.

It would appear that 7.8% of CervoMed shares are controlled by hedge funds. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Joshua Boger is currently the company's largest shareholder with 13% of shares outstanding. With 9.9% and 8.9% of the shares outstanding respectively, RA Capital Management, L.P. and Sylvie Gregoire are the second and third largest shareholders. Sylvie Gregoire, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors. Furthermore, CEO John Alam is the owner of 8.9% of the company's shares.

We also observed that the top 6 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of CervoMed

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Our most recent data indicates that insiders own a reasonable proportion of CervoMed Inc.. It has a market capitalization of just US$116m, and insiders have US$41m worth of shares in their own names. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. 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 CervoMed. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With an ownership of 9.9%, 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:

It's always worth thinking about the different groups who own shares in a company. But to understand CervoMed better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for CervoMed you should be aware of, and 2 of them shouldn't be ignored.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.