After a year of 6.4% returns, Lynas Rare Earths Limited's (ASX:LYC) share price drop last week may have less of an impact on institutional investors

Key Insights

• Institutions' substantial holdings in Lynas Rare Earths implies that they have significant influence over the company's share price
• The top 9 shareholders own 52% of the company
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

If you want to know who really controls Lynas Rare Earths Limited (ASX:LYC), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 60% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Losing money on investments is something no shareholder enjoys, least of all institutional investors who saw their holdings value drop by 8.5% last week. However, the 6.4% one-year return to shareholders may have helped lessen their pain. They should, however, be mindful of further losses in the future.

Let's delve deeper into each type of owner of Lynas Rare Earths, beginning with the chart below.

Check out our latest analysis for Lynas Rare Earths

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

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 Lynas Rare Earths does have institutional investors; and they hold a good portion of the company's stock. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Lynas Rare Earths, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Lynas Rare Earths. Australian Super Pty Ltd is currently the largest shareholder, with 8.5% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.4% and 7.1%, of the shares outstanding, respectively.

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 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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Lynas Rare Earths

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. 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.

Our data suggests that insiders own under 1% of Lynas Rare Earths Limited in their own names. However, it's possible that insiders might have an indirect interest through a more complex structure. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own AU$29m worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 29% stake in Lynas Rare Earths. 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

It seems that Private Companies own 10%, of the Lynas Rare Earths stock. 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.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Take risks for example - Lynas Rare Earths has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.