Positive week for Paladin Energy Ltd (ASX:PDN) institutional investors who lost 38% over the past year

Key Insights

• Significantly high institutional ownership implies Paladin Energy's stock price is sensitive to their trading actions
• The top 10 shareholders own 51% of the company
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

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A look at the shareholders of Paladin Energy Ltd (ASX:PDN) can tell us which group is most powerful. The group holding the most number of shares in the company, around 75% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors would appreciate the 4.0% increase in share price last week, given their one-year losses have totalled a disappointing 38%.

In the chart below, we zoom in on the different ownership groups of Paladin Energy.

View our latest analysis for Paladin Energy

What Does The Institutional Ownership Tell Us About Paladin Energy?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

Paladin 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. 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 Paladin Energy'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. We note that hedge funds don't have a meaningful investment in Paladin Energy. State Street Global Advisors, Inc. is currently the largest shareholder, with 8.8% of shares outstanding. For context, the second largest shareholder holds about 6.3% of the shares outstanding, followed by an ownership of 5.6% by the third-largest shareholder.

We did some more digging and found that 10 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Paladin Energy

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 Paladin Energy Ltd in their own names. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own AU$12m worth of shares. It is always good to see at least some insider ownership, 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 Paladin Energy. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Paladin Energy better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Paladin Energy you should be aware of, and 1 of them is a bit concerning.

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.