Can We See Significant Institutional Ownership On The Pilbara Minerals Limited (ASX:PLS) Share Register?

A look at the shareholders of Pilbara Minerals Limited (ASX:PLS) can tell us which group is most powerful. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of smaller companies. Companies that have been privatized tend to have low insider ownership.

With a market capitalization of AU$689m, Pilbara Minerals 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’s seems that institutional investors have bought into the company. Let’s delve deeper into each type of owner, to discover more about Pilbara Minerals.

See our latest analysis for Pilbara Minerals

ASX:PLS Ownership Summary, February 5th 2020
ASX:PLS Ownership Summary, February 5th 2020

What Does The Institutional Ownership Tell Us About Pilbara Minerals?

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.

As you can see, institutional investors own 11% of Pilbara Minerals. 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. 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 Pilbara Minerals, (below). Of course, keep in mind that there are other factors to consider, too.

ASX:PLS Income Statement, February 5th 2020
ASX:PLS Income Statement, February 5th 2020

We note that hedge funds don’t have a meaningful investment in Pilbara Minerals. Contemporary Amperex Technology Co., Limited is currently the company’s largest shareholder with 8.2% of shares outstanding. The second and third largest shareholders are Ganfeng Lithium Co., Ltd. and Mineral Resources Limited, holding 6.9% and 6.2%, respectively.

Our studies suggest that the top 25 shareholders collectively control less than 50% 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Pilbara Minerals

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.

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.

Our data suggests that insiders own under 1% of Pilbara Minerals Limited in their own names. But they may have an indirect interest through a corporate structure that we haven’t picked up on. It seems the board members have no more than AU$5.8m worth of shares in the AU$689m company. 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, who are mostly retail investors, collectively hold 58% of Pilbara Minerals shares. 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 8.7%, 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.

Public Company Ownership

Public companies currently own 21% of PLS 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Like risks, for instance. Every company has them, and we’ve spotted 3 warning signs for Pilbara Minerals (of which 1 makes us a bit uncomfortable!) you should know about.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

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