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The big shareholder groups in Little Green Pharma Ltd (ASX:LGP) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.
With a market capitalization of AU$136m, Little Green Pharma is a small cap stock, so it might not be well known by many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutional investors have bought into the company. Let's take a closer look to see what the different types of shareholders can tell us about Little Green Pharma.
What Does The Institutional Ownership Tell Us About Little Green Pharma?
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.
Little Green Pharma 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Little Green Pharma, (below). Of course, keep in mind that there are other factors to consider, too.
Hedge funds don't have many shares in Little Green Pharma. Looking at our data, we can see that the largest shareholder is Elixxer Ltd. with 20% of shares outstanding. For context, the second largest shareholder holds about 13% of the shares outstanding, followed by an ownership of 5.1% by the third-largest shareholder. Fleta Solomon, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.
We also observed that the top 8 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.
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. As far I can tell there isn't analyst coverage of the company, so it is probably flying under the radar.
Insider Ownership Of Little Green Pharma
The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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 Little Green Pharma Ltd. Insiders own AU$31m worth of shares in the AU$136m company. 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 holds a 38% stake in Little Green Pharma. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Company Ownership
We can see that Private Companies own 12%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.
Public Company Ownership
Public companies currently own 20% of Little Green Pharma stock. 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.
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. Take risks for example - Little Green Pharma has 3 warning signs (and 1 which is concerning) we think 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.
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