Recent uptick might appease Champion Iron Limited (ASX:CIA) institutional owners after losing 21% over the past year

Explore Champion Iron's Fair Values from the Community and select yours

Key Insights

• Significantly high institutional ownership implies Champion Iron's stock price is sensitive to their trading actions
• A total of 9 investors have a majority stake in the company with 52% ownership
• 11% of Champion Iron is held by insiders

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To get a sense of who is truly in control of Champion Iron Limited (ASX:CIA), it is important to understand the ownership structure of the business. With 34% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

After a year of 21% losses, last week’s 3.8% gain would be welcomed by institutional investors as a possible sign that returns might start trending higher.

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

See our latest analysis for Champion Iron

What Does The Institutional Ownership Tell Us About Champion Iron?

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.

We can see that Champion Iron does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Champion Iron'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 Champion Iron. Investissement Québec, Investment Arm is currently the company's largest shareholder with 8.2% of shares outstanding. The second and third largest shareholders are WC Strategic Opportunity, L.P. and William O’Keeffe, with an equal amount of shares to their name at 8.1%. William O’Keeffe, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.

We did some more digging and found that 9 of the top shareholders account for roughly 52% 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 Champion Iron

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.

It seems insiders own a significant proportion of Champion Iron Limited. Insiders own AU$258m worth of shares in the AU$2.3b company. That's quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 33% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Champion Iron. 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.

Private Equity Ownership

With an ownership of 8.2%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Private Company Ownership

It seems that Private Companies own 14%, of the Champion Iron 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Champion Iron better, we need to consider many other factors. Take risks for example - Champion Iron has 2 warning signs (and 1 which is a bit concerning) we think you should know about.

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.