Recent uptick might appease Pilbara Minerals Limited (ASX:PLS) institutional owners after losing 62% over the past year

Key Insights

• Given the large stake in the stock by institutions, Pilbara Minerals' stock price might be vulnerable to their trading decisions
• The top 10 shareholders own 52% of the company
• Recent purchases by insiders

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Every investor in Pilbara Minerals Limited (ASX:PLS) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 59% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Last week's AU$209m market cap gain would probably be appreciated by institutional investors, especially after a year of 62% losses.

In the chart below, we zoom in on the different ownership groups of Pilbara Minerals.

See our latest analysis for Pilbara Minerals

What Does The Institutional Ownership Tell Us About Pilbara Minerals?

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.

Pilbara Minerals 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 Pilbara Minerals' earnings history below. Of course, the future is what really matters.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Pilbara Minerals is not owned by hedge funds. Australian Super Pty Ltd is currently the largest shareholder, with 9.8% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 8.5% and 5.4%, of the shares outstanding, respectively.

We did some more digging and found that 10 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.

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

Insider Ownership Of Pilbara Minerals

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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.

Our most recent data indicates that insiders own less than 1% of Pilbara Minerals Limited. 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$25m worth of shares. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 32% stake in Pilbara Minerals. 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.

Public Company Ownership

Public companies currently own 8.3% of Pilbara Minerals stock. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

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.

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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.