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Could The Pensana Rare Earths Plc (ASX:PM8) Ownership Structure Tell Us Something Useful?

Simply Wall St
·5 min read

A look at the shareholders of Pensana Rare Earths Plc (ASX:PM8) can tell us which group is most powerful. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

Pensana Rare Earths is not a large company by global standards. It has a market capitalization of AU$394m, which means it wouldn't have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutions are not really that prevalent on the share registry. We can zoom in on the different ownership groups, to learn more about Pensana Rare Earths.

Check out our latest analysis for Pensana Rare Earths

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About Pensana Rare Earths?

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.

Less than 5% of Pensana Rare Earths is held by institutional investors. This suggests that some funds have the company in their sights, but many have not yet bought shares in it. If the company is growing earnings, that may indicate that it is just beginning to catch the attention of these deep-pocketed investors. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.

earnings-and-revenue-growth
earnings-and-revenue-growth

We note that hedge funds don't have a meaningful investment in Pensana Rare Earths. QG Investments Africa Management Ltd. is currently the largest shareholder, with 16% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 4.5% and 2.1%, of the shares outstanding, respectively. Mark Hohnen, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.

On studying our ownership data, we found that 19 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Pensana Rare Earths

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 most recent data indicates that insiders own a reasonable proportion of Pensana Rare Earths Plc. It has a market capitalization of just AU$394m, and insiders have AU$69m worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public, mostly retail investors, hold a substantial 60% stake in Pensana Rare Earths, suggesting it is a fairly popular stock. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Private Equity Ownership

With an ownership of 16%, 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.

Private Company Ownership

We can see that Private Companies own 4.2%, of the shares on issue. 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 Pensana Rare Earths better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Pensana Rare Earths (of which 2 make us uncomfortable!) you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.