Sheffield Resources Limited's (ASX:SFX) market cap dropped AU$37m last week; Retail investors bore the brunt

Key Insights

• The considerable ownership by retail investors in Sheffield Resources indicates that they collectively have a greater say in management and business strategy
• 40% of the business is held by the top 23 shareholders
• Insider ownership in Sheffield Resources is 14%

If you want to know who really controls Sheffield Resources Limited (ASX:SFX), 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 retail investors. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And last week, retail investors endured the biggest losses as the stock fell by 17%.

In the chart below, we zoom in on the different ownership groups of Sheffield Resources.

View our latest analysis for Sheffield Resources

What Does The Institutional Ownership Tell Us About Sheffield Resources?

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

We note that hedge funds don't have a meaningful investment in Sheffield Resources. Our data shows that Hebei Yanshan Iron and Steel Group Co., Ltd. is the largest shareholder with 9.9% of shares outstanding. For context, the second largest shareholder holds about 6.4% of the shares outstanding, followed by an ownership of 5.8% by the third-largest shareholder.

On studying our ownership data, we found that 23 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Sheffield Resources

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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 most recent data indicates that insiders own a reasonable proportion of Sheffield Resources Limited. It has a market capitalization of just AU$185m, and insiders have AU$26m worth of shares in their own names. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public -- including retail investors -- own 60% of Sheffield Resources. 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.

Private Company Ownership

We can see that Private Companies own 16%, of the shares on issue. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Sheffield Resources is showing 1 warning sign in our investment analysis , you should know about...

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.