Li-S Energy Limited's (ASX:LIS) market cap dropped AU$77m last week; Public companies bore the brunt

By
Simply Wall St
Published
February 22, 2022
ASX:LIS
Source: Shutterstock

A look at the shareholders of Li-S Energy Limited (ASX:LIS) can tell us which group is most powerful. We can see that public companies own the lion's share in the company with 45% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

As a result, public companies as a group endured the highest losses last week after market cap fell by AU$77m.

Let's take a closer look to see what the different types of shareholders can tell us about Li-S Energy.

Check out our latest analysis for Li-S Energy

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ASX:LIS Ownership Breakdown February 22nd 2022

What Does The Institutional Ownership Tell Us About Li-S Energy?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Li-S Energy already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Li-S Energy, (below). Of course, keep in mind that there are other factors to consider, too.

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ASX:LIS Earnings and Revenue Growth February 22nd 2022

Li-S Energy is not owned by hedge funds. PPK Group Limited is currently the company's largest shareholder with 45% of shares outstanding. In comparison, the second and third largest shareholders hold about 13% and 4.7% of the stock.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Li-S Energy

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.

We can report that insiders do own shares in Li-S Energy Limited. As individuals, the insiders collectively own AU$29m worth of the AU$656m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 24% stake in Li-S Energy. 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.

Private Company Ownership

We can see that Private Companies own 11%, 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 45% of Li-S Energy stock. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

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 Li-S Energy (of which 1 is concerning!) 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.

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