Institutional investors may adopt severe steps after 29Metals Limited's (ASX:29M) latest 10.0% drop adds to a year losses

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 55% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

A look at the shareholders of 29Metals Limited (ASX:29M) can tell us which group is most powerful. With 67% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, institutional investors endured the highest losses last week after market cap fell by AU$28m. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 51% might not go down well especially with this category of shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. As a result, if the downtrend continues, institutions may face pressures to sell 29Metals, which might have negative implications on individual investors.

Let's delve deeper into each type of owner of 29Metals, beginning with the chart below.

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.

As you can see, institutional investors have a fair amount of stake in 29Metals. 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.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in 29Metals. The company's largest shareholder is EMR Capital Advisors Pty Ltd., with ownership of 31%. Meanwhile, the second and third largest shareholders, hold 14% and 9.7%, of the shares outstanding, respectively.

A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 55% stake.

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

Insider Ownership Of 29Metals

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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 29Metals Limited. However, it's possible that insiders might have an indirect interest through a more complex structure. It appears that the board holds about AU$1.7m worth of stock. This compares to a market capitalization of AU$253m. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.

General Public Ownership

The general public, who are usually individual investors, hold a 15% stake in 29Metals. 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

Private equity firms hold a 9.7% stake in 29Metals. This suggests they can be influential in key policy decisions. 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.

Private Company Ownership

Our data indicates that Private Companies hold 3.8%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Public Company Ownership

Public companies currently own 3.9% of 29Metals 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:

It's always worth thinking about the different groups who own shares in a company. But to understand 29Metals better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for 29Metals you should be aware of.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.