Given the large stake in the stock by institutions, Paladin Energy's 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
If you want to know who really controls Paladin Energy Ltd (ASX:PDN), then you'll have to look at the makeup of its share registry. With 63% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 3.1% in value last week. However, the 46% one-year return to shareholders might have softened the blow. But they would probably be wary of future losses.
Let's delve deeper into each type of owner of Paladin Energy, beginning with the chart below.
What Does The Institutional Ownership Tell Us About Paladin Energy?
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 Paladin Energy does have institutional investors; and they hold a good portion of the company's stock. 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 Paladin Energy's historic earnings and revenue below, but keep in mind there's always more to the story.
earnings-and-revenue-growth
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in Paladin Energy. The company's largest shareholder is State Street Global Advisors, Inc., with ownership of 11%. For context, the second largest shareholder holds about 8.7% of the shares outstanding, followed by an ownership of 7.5% by the third-largest shareholder.
On further inspection, we found that more than half the company's shares are owned by the top 9 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
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 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 Paladin Energy
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.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our data suggests that insiders own under 1% of Paladin Energy Ltd in their own names. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. Keep in mind that it's a big company, and the insiders own AU$19m worth of shares. The absolute value might be more important than the proportional share. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.
General Public Ownership
The general public-- including retail investors -- own 33% stake in the company, and hence can't easily be ignored. 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 Company Ownership
It seems that Private Companies own 3.4%, of the Paladin Energy stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Paladin Energy better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Paladin Energy you should know about.
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.
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