Sovereign Metals Limited's (ASX:SVM) market cap dropped AU$42m last week; Retail investors bore the brunt

Key Insights

• The considerable ownership by retail investors in Sovereign Metals indicates that they collectively have a greater say in management and business strategy
• A total of 25 investors have a majority stake in the company with 44% ownership
• Insiders own 11% of Sovereign Metals

A look at the shareholders of Sovereign Metals Limited (ASX:SVM) can tell us which group is most powerful. The group holding the most number of shares in the company, around 56% to be precise, is retail investors. Put another way, the group faces the maximum upside potential (or downside risk).

And following last week's 10% decline in share price, retail investors suffered the most losses.

Let's delve deeper into each type of owner of Sovereign Metals, beginning with the chart below.

Check out our latest analysis for Sovereign Metals

What Does The Institutional Ownership Tell Us About Sovereign Metals?

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 Sovereign Metals. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Sovereign Metals' earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in Sovereign Metals. The company's largest shareholder is Rio Tinto Group, with ownership of 20%. For context, the second largest shareholder holds about 7.3% of the shares outstanding, followed by an ownership of 2.7% by the third-largest shareholder. Ian Middlemas, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.

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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Sovereign Metals

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

It seems insiders own a significant proportion of Sovereign Metals Limited. Insiders have a AU$40m stake in this AU$362m business. 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 56% of Sovereign Metals. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Private Company Ownership

It seems that Private Companies own 3.3%, of the Sovereign Metals stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Public Company Ownership

Public companies currently own 21% of Sovereign Metals stock. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.

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. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Sovereign Metals (of which 2 are potentially serious!) you should know about.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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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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