Brazilian Rare Earths Limited's (ASX:BRE) market cap increased by AU$62m, insiders receive a 37% cut

Key Insights

• Brazilian Rare Earths' significant insider ownership suggests inherent interests in company's expansion
• The top 7 shareholders own 56% of the company
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

Every investor in Brazilian Rare Earths Limited (ASX:BRE) should be aware of the most powerful shareholder groups. We can see that individual insiders own the lion's share in the company with 37% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Clearly, insiders benefitted the most after the company's market cap rose by AU$62m last week.

In the chart below, we zoom in on the different ownership groups of Brazilian Rare Earths.

Check out our latest analysis for Brazilian Rare Earths

What Does The Institutional Ownership Tell Us About Brazilian Rare Earths?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Institutions have a very small stake in Brazilian Rare Earths. That indicates that the company is on the radar of some funds, but it isn't particularly popular with professional investors at the moment. If the business gets stronger from here, we could see a situation where more institutions are keen to buy. It is not uncommon to see a big share price rise if multiple institutional investors are trying to buy into a stock at the same time. So check out the historic earnings trajectory, below, but keep in mind it's the future that counts most.

It would appear that 5.3% of Brazilian Rare Earths shares are controlled by hedge funds. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Our data shows that Kuda Huraa Mining Ventures And Global Investments Corp is the largest shareholder with 11% of shares outstanding. For context, the second largest shareholder holds about 10.0% of the shares outstanding, followed by an ownership of 7.1% by the third-largest shareholder. Two of the top three shareholders happen to be Top Key Executive and Member of the Board of Directors, respectively. That is, insiders feature higher up in the heirarchy of the company's top shareholders.

We also observed that the top 7 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Brazilian Rare Earths

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 information suggests that insiders maintain a significant holding in Brazilian Rare Earths Limited. It has a market capitalization of just AU$629m, and insiders have AU$230m worth of shares in their own names. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 28% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Brazilian Rare Earths. 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 Company Ownership

It seems that Private Companies own 20%, of the Brazilian Rare Earths stock. 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.

Public Company Ownership

It appears to us that public companies own 6.9% of Brazilian Rare Earths. 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 Brazilian Rare Earths better, we need to consider many other factors. For example, we've discovered 3 warning signs for Brazilian Rare Earths (1 is a bit concerning!) that you should be aware of before investing here.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.