Painful week for individual investors invested in Allkem Limited (ASX:AKE) after 8.4% drop, institutions also suffered losses

Key Insights

• Allkem's significant individual investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• The top 25 shareholders own 36% of the company
• Institutional ownership in Allkem is 30%

A look at the shareholders of Allkem Limited (ASX:AKE) can tell us which group is most powerful. We can see that individual investors own the lion's share in the company with 60% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While the holdings of individual investors took a hit after last week’s 8.4% price drop, institutions with their 30% holdings also suffered.

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

View our latest analysis for Allkem

What Does The Institutional Ownership Tell Us About Allkem?

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 Allkem does have institutional investors; and they hold a good portion of the company's stock. 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 Allkem's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Allkem. Looking at our data, we can see that the largest shareholder is Toyota Tsusho Corporation with 6.1% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.4% and 5.0%, of the shares outstanding, respectively.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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. 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 Allkem

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

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 some shares in Allkem Limited. The insiders have a meaningful stake worth AU$91m. Most would see this as a real positive. It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public -- including retail investors -- own 60% of Allkem. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Public Company Ownership

Public companies currently own 6.1% of Allkem 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Allkem better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

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.

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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.