Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Every investor in Canada Rare Earth Corp. (CVE:LL) should be aware of the most powerful shareholder groups. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. 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.'
Canada Rare Earth is a smaller company with a market capitalization of CA$12m, so it may still be flying under the radar of many institutional investors. Our analysis of the ownership of the company, below, shows that institutional investors have not yet purchased shares. Let's take a closer look to see what the different types of shareholder can tell us about LL.
What Does The Lack Of Institutional Ownership Tell Us About Canada Rare Earth?
Small companies that are not very actively traded often lack institutional investors, but it's less common to see large companies without them.
There are many reasons why a company might not have any institutions on the share registry. It may be hard for institutions to buy large amounts of shares, if liquidity (the amount of shares traded each day) is low. If the company has not needed to raise capital, institutions might lack the opportunity to build a position. On the other hand, it's always possible that professional investors are avoiding a company because they don't think it's the best place for their money. Canada Rare Earth might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.
Hedge funds don't have many shares in Canada Rare Earth. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.
Insider Ownership Of Canada Rare Earth
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.
Our information suggests that insiders maintain a significant holding in Canada Rare Earth Corp.. Insiders have a CA$1.4m stake in this CA$12m business. 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 -- own 78% of Canada Rare Earth . 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 Company Ownership
We can see that Private Companies own 9.7%, 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.
It's always worth thinking about the different groups who own shares in a company. But to understand Canada Rare Earth better, we need to consider many other factors.
I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free .
Of course this may not be the best stock to buy. So take a peek at this free 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.