Retail investors invested in Liontown Resources Limited (ASX:LTR) copped the brunt of last week's AU$198m market cap decline

Key Insights

• Liontown Resources' significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• 52% of the business is held by the top 6 shareholders
• Insiders own 18% of Liontown Resources

To get a sense of who is truly in control of Liontown Resources Limited (ASX:LTR), it is important to understand the ownership structure of the business. We can see that retail investors own the lion's share in the company with 36% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And last week, retail investors endured the biggest losses as the stock fell by 3.0%.

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

See our latest analysis for Liontown Resources

What Does The Institutional Ownership Tell Us About Liontown Resources?

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.

As you can see, institutional investors have a fair amount of stake in Liontown Resources. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 Liontown Resources' earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Liontown Resources. The company's largest shareholder is Hancock Prospecting Pty Ltd, with ownership of 20%. For context, the second largest shareholder holds about 15% of the shares outstanding, followed by an ownership of 5.1% by the third-largest shareholder.

On further inspection, we found that more than half the company's shares are owned by the top 6 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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 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 Liontown Resources

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 a reasonable proportion of Liontown Resources Limited. Insiders own AU$1.1b worth of shares in the AU$6.3b 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

The general public-- including retail investors -- own 36% stake in the company, and hence can't easily be ignored. 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 Company Ownership

Our data indicates that Private Companies hold 24%, of the company's shares. 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 4.4% of Liontown Resources. 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 Liontown Resources better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Liontown Resources 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.