With 53% institutional ownership, Aehr Test Systems (NASDAQ:AEHR) is a favorite amongst the big guns
Key Insights
Institutions' substantial holdings in Aehr Test Systems implies that they have significant influence over the company's share price
50% of the business is held by the top 23 shareholders
If you want to know who really controls Aehr Test Systems (NASDAQ:AEHR), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 53% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with 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 Aehr Test Systems.
Check out our latest analysis for Aehr Test Systems
What Does The Institutional Ownership Tell Us About Aehr Test Systems?
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.
We can see that Aehr Test Systems 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 Aehr Test Systems' earnings history below. Of course, the future is what really matters.
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Our data indicates that hedge funds own 5.9% of Aehr Test Systems. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. AWM Investment Company Inc is currently the company's largest shareholder with 5.9% of shares outstanding. With 4.9% and 4.6% of the shares outstanding respectively, Hood River Capital Management LLC and FMR LLC are the second and third largest shareholders. Furthermore, CEO Gayn Erickson is the owner of 1.8% of the company's shares.
A closer look at our ownership figures suggests that the top 23 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.
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 Aehr Test Systems
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.
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.
Shareholders would probably be interested to learn that insiders own shares in Aehr Test Systems. It has a market capitalization of just US$877m, and insiders have US$59m worth of shares, in their own names. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.
General Public Ownership
The general public, who are usually individual investors, hold a 35% stake in Aehr Test Systems. 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.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 4 warning signs for Aehr Test Systems you should be aware of, and 1 of them makes us a bit uncomfortable.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.
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