Institutional owners may consider drastic measures as Piedmont Lithium Inc.'s (ASX:PLL) recent AU$39m drop adds to long-term losses

Key Insights

• Given the large stake in the stock by institutions, Piedmont Lithium's stock price might be vulnerable to their trading decisions
• The top 25 shareholders own 46% 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 Piedmont Lithium Inc. (ASX:PLL), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 46% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And institutional investors endured the highest losses after the company's share price fell by 11% last week. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 79% might not go down well especially with this category of shareholders. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in Piedmont Lithium's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

In the chart below, we zoom in on the different ownership groups of Piedmont Lithium.

View our latest analysis for Piedmont Lithium

What Does The Institutional Ownership Tell Us About Piedmont Lithium?

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 Piedmont Lithium. 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 Piedmont Lithium's historic earnings and revenue below, but keep in mind there's always more to the story.

Piedmont Lithium is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is BlackRock, Inc. with 7.3% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.7% and 5.4% of the stock. In addition, we found that Keith Phillips, the CEO has 0.7% of the shares allocated to their name.

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.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Piedmont Lithium

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Shareholders would probably be interested to learn that insiders own shares in Piedmont Lithium Inc.. As individuals, the insiders collectively own AU$7.8m worth of the AU$320m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 44% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Piedmont Lithium. 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.

Public Company Ownership

Public companies currently own 5.7% of Piedmont Lithium stock. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

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.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com