In the wake of 29Metals Limited's (ASX:29M) latest AU$34m market cap drop, institutional owners may be forced to take severe actions

Key Insights

• Given the large stake in the stock by institutions, 29Metals' stock price might be vulnerable to their trading decisions
• The top 3 shareholders own 50% of the company
• Insiders have bought recently

To get a sense of who is truly in control of 29Metals Limited (ASX:29M), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 41% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to AU$281m last week after a 11% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 5.9% might not go down well especially with this category of shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. Hence, if weakness in 29Metals' share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

Let's take a closer look to see what the different types of shareholders can tell us about 29Metals.

See our latest analysis for 29Metals

What Does The Institutional Ownership Tell Us About 29Metals?

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.

29Metals already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at 29Metals' earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in 29Metals. PT Delta Dunia Makmur Tbk is currently the company's largest shareholder with 19% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 16% and 15%, of the shares outstanding, respectively.

To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of 29Metals

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own less than 1% of 29Metals Limited. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It seems the board members have no more than AU$1.0m worth of shares in the AU$281m company. We 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-- including retail investors -- own 30% stake in the company, and hence can't easily be ignored. 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 Equity Ownership

With a stake of 7.3%, private equity firms could influence the 29Metals board. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Public Company Ownership

Public companies currently own 19% of 29Metals 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. For instance, we've identified 1 warning sign for 29Metals that you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.

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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.