The big shareholder groups in LightPath Technologies, Inc. (NASDAQ:LPTH) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. 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.
LightPath Technologies is a smaller company with a market capitalization of US$109m, so it may still be flying under the radar of many institutional investors. In the chart below, we can see that institutions are noticeable on the share registry. Let's take a closer look to see what the different types of shareholders can tell us about LightPath Technologies.
What Does The Institutional Ownership Tell Us About LightPath Technologies?
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.
LightPath Technologies 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 LightPath Technologies, (below). Of course, keep in mind that there are other factors to consider, too.
It looks like hedge funds own 5.4% of LightPath Technologies shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Shanghai Pudong Science and Technology Investment Co., Ltd. is currently the company's largest shareholder with 8.7% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.0% and 5.4% of the stock.
Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.
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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.
Insider Ownership Of LightPath Technologies
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.
We can see that insiders own shares in LightPath Technologies, Inc.. As individuals, the insiders collectively own US$5.5m worth of the US$109m company. It is good to see some investment by insiders, but I usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.
General Public Ownership
The general public -- mostly retail investors -- own 55% of LightPath Technologies. This size of ownership gives retail investors collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.
Private Equity Ownership
Private equity firms hold a 16% stake in LightPath Technologies. This suggests they can be influential in key policy decisions. 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.
It's always worth thinking about the different groups who own shares in a company. But to understand LightPath Technologies better, we need to consider many other factors. Be aware that LightPath Technologies is showing 1 warning sign in our investment analysis , you should know about...
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.
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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