Institutions along with individual investors who hold considerable shares inPiedmont Lithium Inc. (ASX:PLL) come under pressure; lose 7.6% of holdings value

To get a sense of who is truly in control of Piedmont Lithium Inc. (ASX:PLL), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 56% to be precise, is individual investors. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While institutions who own 23% came under pressure after market cap dropped to AU$1.2b last week,individual investors took the most losses.

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

See our latest analysis for Piedmont Lithium

What Does The Institutional Ownership Tell Us About Piedmont Lithium?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

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.

Our data indicates that hedge funds own 6.8% of Piedmont Lithium. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Alyeska Investment Group, L.P. is currently the company's largest shareholder with 6.8% of shares outstanding. For context, the second largest shareholder holds about 4.4% of the shares outstanding, followed by an ownership of 3.6% by the third-largest shareholder. Furthermore, CEO Keith Phillips is the owner of 0.8% of the company's shares.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our information suggests that insiders maintain a significant holding in Piedmont Lithium Inc.. Insiders have a AU$140m stake in this AU$1.2b business. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, mostly comprising of individual investors, collectively holds 56% of Piedmont Lithium 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. For example, we've discovered 3 warning signs for Piedmont Lithium (2 shouldn't be ignored!) that you should be aware of before investing here.

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.

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 (at) simplywallst.com.