Is Lynas Rare Earths Limited (ASX:LYC) Popular Amongst Institutions?

By
Simply Wall St
Published
December 13, 2021
ASX:LYC
Source: Shutterstock

Every investor in Lynas Rare Earths Limited (ASX:LYC) should be aware of the most powerful shareholder groups. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. Companies that used to be publicly owned tend to have lower insider ownership.

Lynas Rare Earths is a pretty big company. It has a market capitalization of AU$8.1b. Normally institutions would own a significant portion of a company this size. Taking a look at our data on the ownership groups (below), it seems that institutions are noticeable on the share registry. Let's delve deeper into each type of owner, to discover more about Lynas Rare Earths.

View our latest analysis for Lynas Rare Earths

ownership-breakdown
ASX:LYC Ownership Breakdown December 13th 2021

What Does The Institutional Ownership Tell Us About Lynas 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.

Lynas Rare Earths already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Lynas Rare Earths' earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
ASX:LYC Earnings and Revenue Growth December 13th 2021

We note that hedge funds don't have a meaningful investment in Lynas Rare Earths. Looking at our data, we can see that the largest shareholder is FMR LLC with 7.2% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 6.0% and 5.7%, of the shares outstanding, respectively.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

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. 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 Lynas Rare Earths

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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. 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$65m 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, mostly comprising of individual investors, collectively holds 54% of Lynas Rare Earths shares. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. To that end, you should be aware of the 2 warning signs we've spotted with Lynas Rare Earths .

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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