Institutional investors may overlook Paladin Energy Ltd's (ASX:PDN) recent AU$472m market cap drop as long-term gains remain positive

Key Insights

• Institutions' substantial holdings in Paladin Energy implies that they have significant influence over the company's share price
• A total of 12 investors have a majority stake in the company with 51% ownership
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

To get a sense of who is truly in control of Paladin Energy Ltd (ASX:PDN), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 56% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors endured the highest losses after the company's market cap fell by AU$472m last week. However, the 120% one-year returns may have helped alleviate their overall losses. But they would probably be wary of future losses.

Let's delve deeper into each type of owner of Paladin Energy, beginning with the chart below.

Check out our latest analysis for Paladin Energy

What Does The Institutional Ownership Tell Us About Paladin Energy?

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 Paladin Energy does have institutional investors; and they hold a good portion of the company's 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. 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 Paladin Energy, (below). Of course, keep in mind that there are other factors to consider, too.

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 Paladin Energy. FMR LLC is currently the company's largest shareholder with 8.8% of shares outstanding. For context, the second largest shareholder holds about 6.6% of the shares outstanding, followed by an ownership of 5.6% by the third-largest shareholder.

After doing some more digging, we found that the top 12 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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 are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Paladin Energy

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 most recent data indicates that insiders own less than 1% of Paladin Energy Ltd. However, it's possible that insiders might have an indirect interest through a more complex structure. Keep in mind that it's a big company, and the insiders own AU$23m worth of shares. The absolute value might be more important than the proportional share. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

With a 39% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Paladin Energy. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

We can see that Private Companies own 3.4%, 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Paladin Energy , and understanding them should be part of your investment process.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.