Institutional owners may consider drastic measures as Syrah Resources Limited's (ASX:SYR) recent AU$31m drop adds to long-term losses

Key Insights

• Given the large stake in the stock by institutions, Syrah Resources' stock price might be vulnerable to their trading decisions
• The top 4 shareholders own 50% of the company
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

Every investor in Syrah Resources Limited (ASX:SYR) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 72% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And institutional investors saw their holdings value drop by 12% last week. The recent loss, which adds to a one-year loss of 46% for stockholders, may not sit well with this group of investors. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the decline continues, institutional investors may be pressured to sell Syrah Resources which might hurt individual investors.

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

See our latest analysis for Syrah Resources

What Does The Institutional Ownership Tell Us About Syrah 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.

We can see that Syrah Resources does have institutional investors; and they hold a good portion of the company's stock. 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 Syrah Resources' historic earnings and revenue below, but keep in mind there's always more to the story.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Hedge funds don't have many shares in Syrah Resources. Our data shows that Australian Super Pty Ltd is the largest shareholder with 33% of shares outstanding. Paradice Investment Management Pty Ltd. is the second largest shareholder owning 7.0% of common stock, and Citigroup Inc.,Banking and Securities Investments holds about 5.3% of the company stock.

Our research also brought to light the fact that roughly 50% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Syrah Resources

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.

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 some shares in Syrah Resources Limited. It has a market capitalization of just AU$238m, and insiders have AU$11m worth of shares, in their own names. Some would say this shows alignment of interests between shareholders and the board, though we generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.

General Public Ownership

With a 23% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Syrah Resources. 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.

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. For example, we've discovered 3 warning signs for Syrah Resources (1 is a bit unpleasant!) 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.

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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.