Given the large stake in the stock by institutions, Pilbara Minerals' stock price might be vulnerable to their trading decisions
A total of 9 investors have a majority stake in the company with 51% ownership
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
A look at the shareholders of Pilbara Minerals Limited (ASX:PLS) can tell us which group is most powerful. The group holding the most number of shares in the company, around 59% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).
Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.
In the chart below, we zoom in on the different ownership groups of Pilbara Minerals.
What Does The Institutional Ownership Tell Us About Pilbara Minerals?
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.
As you can see, institutional investors have a fair amount of stake in Pilbara Minerals. 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Pilbara Minerals' historic earnings and revenue below, but keep in mind there's always more to the story.
earnings-and-revenue-growth
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Pilbara Minerals is not owned by hedge funds. State Street Global Advisors, Inc. is currently the largest shareholder, with 11% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.4% and 6.3% of the stock.
We did some more digging and found that 9 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 studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Pilbara Minerals
The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.
Our data suggests that insiders own under 1% of Pilbara Minerals Limited in their own names. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own AU$76m worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
With a 32% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Pilbara Minerals. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
Public Company Ownership
Public companies currently own 8.5% of Pilbara Minerals stock. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Pilbara Minerals better, we need to consider many other factors. For instance, we've identified 2 warning signs for Pilbara Minerals that you should be aware of.
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.
