A look at the shareholders of Western Areas Limited (ASX:WSA) can tell us which group is most powerful. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. We also tend to see lower insider ownership in companies that were previously publicly owned.
Western Areas is a smaller company with a market capitalization of AU$654m, so it may still be flying under the radar of many institutional investors. In the chart below 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 shareholder can tell us about WSA.
What Does The Institutional Ownership Tell Us About Western Areas?
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.
We can see that Western Areas does have institutional investors; and they hold 50% of the stock. 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Western Areas's historic earnings and revenue, below, but keep in mind there's always more to the story.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in Western Areas. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Western Areas
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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 data suggests that insiders own under 1% of Western Areas Limited in their own names. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It appears that the board holds about AU$3.9m worth of stock. This compares to a market capitalization of AU$654m. I generally like to see a board more invested. However it might be worth checking if those insiders have been buying.
General Public Ownership
The general public holds a 46% stake in WSA. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
While it is well worth considering the different groups that own a company, there are other factors that are even more important.
I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.
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.
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