The considerable ownership by retail investors in Sovereign Metals indicates that they collectively have a greater say in management and business strategy
A total of 25 investors have a majority stake in the company with 41% ownership
A look at the shareholders of Sovereign Metals Limited (ASX:SVM) can tell us which group is most powerful. We can see that retail investors own the lion's share in the company with 59% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
And public companies on the other hand have a 16% ownership in the company.
In the chart below, we zoom in on the different ownership groups of Sovereign Metals.
What Does The Institutional Ownership Tell Us About Sovereign Metals?
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.
Sovereign Metals 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. 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 Sovereign Metals' historic earnings and revenue below, but keep in mind there's always more to the story.
earnings-and-revenue-growth
Sovereign Metals is not owned by hedge funds. Rio Tinto Group is currently the largest shareholder, with 15% of shares outstanding. For context, the second largest shareholder holds about 7.8% of the shares outstanding, followed by an ownership of 2.9% by the third-largest shareholder. Ian Middlemas, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.
Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.
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 is some analyst coverage of the stock, but it could still become more well known, with time.
Insider Ownership Of Sovereign Metals
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.
Our most recent data indicates that insiders own a reasonable proportion of Sovereign Metals Limited. It has a market capitalization of just AU$355m, and insiders have AU$41m worth of shares in their own names. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.
General Public Ownership
The general public, who are usually individual investors, hold a substantial 59% stake in Sovereign Metals, suggesting it is a fairly popular stock. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.
Private Company Ownership
Our data indicates that Private Companies hold 3.5%, of the company's shares. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
Public Company Ownership
It appears to us that public companies own 16% of Sovereign Metals. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.
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.
