Institutional investors in West African Resources Limited (ASX:WAF) see AU$137m decrease in market cap last week, although long-term gains have benefitted them.

Key Insights

• Given the large stake in the stock by institutions, West African Resources' stock price might be vulnerable to their trading decisions
• The top 9 shareholders own 51% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

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If you want to know who really controls West African Resources Limited (ASX:WAF), 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 66% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Institutional investors endured the highest losses after the company's market cap fell by AU$137m last week. However, the 94% one-year return to shareholders may have helped lessen their pain. They should, however, be mindful of further losses in the future.

Let's take a closer look to see what the different types of shareholders can tell us about West African Resources.

Check out our latest analysis for West African Resources

What Does The Institutional Ownership Tell Us About West African Resources?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

West African Resources already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of West African Resources, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. West African Resources is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is L1 Capital Pty. Limited with 10% of shares outstanding. Van Eck Associates Corporation is the second largest shareholder owning 7.7% of common stock, and State Street Global Advisors, Inc. holds about 5.3% of the company stock. Furthermore, CEO Richard Hyde is the owner of 1.5% of the company's shares.

We did some more digging and found that 9 of the top shareholders account for roughly 51% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of West African Resources

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

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 some shares in West African Resources Limited. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around AU$159m worth of shares (at current prices). If you would like to explore the question of insider alignment, 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 27% stake in West African 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:

It's always worth thinking about the different groups who own shares in a company. But to understand West African Resources better, we need to consider many other factors. For instance, we've identified 1 warning sign for West African Resources that you should be aware of.

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.