Institutional investors may adopt severe steps after Piedmont Lithium Inc.'s (ASX:PLL) latest 8.8% drop adds to a year losses
Key Insights
Institutions' substantial holdings in Piedmont Lithium implies that they have significant influence over the company's share price
The top 25 shareholders own 48% of the company
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
A look at the shareholders of Piedmont Lithium Inc. (ASX:PLL) can tell us which group is most powerful. With 47% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
And institutional investors endured the highest losses after the company's share price fell by 8.8% last week. The recent loss, which adds to a one-year loss of 7.1% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the decline continues, institutional investors may be pressured to sell Piedmont Lithium which might hurt individual investors.
In the chart below, we zoom in on the different ownership groups of Piedmont Lithium.
Check out our latest analysis for Piedmont Lithium
What Does The Institutional Ownership Tell Us About Piedmont Lithium?
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.
Piedmont Lithium already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Piedmont Lithium's earnings history below. Of course, the future is what really matters.
Piedmont Lithium is not owned by hedge funds. Our data shows that State Street Global Advisors, Inc. is the largest shareholder with 7.5% of shares outstanding. For context, the second largest shareholder holds about 6.7% of the shares outstanding, followed by an ownership of 5.7% by the third-largest shareholder.
A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.
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 Piedmont Lithium
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.
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.
We can report that insiders do own shares in Piedmont Lithium Inc.. The insiders have a meaningful stake worth AU$91m. Most would see this as a real positive. If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.
General Public Ownership
The general public-- including retail investors -- own 40% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Public Company Ownership
It appears to us that public companies own 5.7% of Piedmont Lithium. 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.
Next Steps:
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Piedmont Lithium (1 is a bit unpleasant!) that you should be aware of before investing here.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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