Could The Western Areas Limited (ASX:WSA) Ownership Structure Tell Us Something Useful?

A look at the shareholders of Western Areas Limited (ASX:WSA) can tell us which group is most powerful. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of smaller companies. Companies that used to be publicly owned tend to have lower insider ownership.

Western Areas is a smaller company with a market capitalization of AU$780m, so it may still be flying under the radar of many institutional investors. Our analysis of the ownership of the company, below, shows that institutions own shares in the company. Let’s take a closer look to see what the different types of shareholder can tell us about Western Areas.

View our latest analysis for Western Areas

ASX:WSA Ownership Summary, January 20th 2020
ASX:WSA Ownership Summary, January 20th 2020

What Does The Institutional Ownership Tell Us About Western Areas?

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.

As you can see, institutional investors own 40% of Western Areas. 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. 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 Western Areas, (below). Of course, keep in mind that there are other factors to consider, too.

ASX:WSA Income Statement, January 20th 2020
ASX:WSA Income Statement, January 20th 2020

We note that hedge funds don’t have a meaningful investment in Western Areas. Looking at our data, we can see that the largest shareholder is Paradice Investment Management Pty Ltd. with 6.5% of shares outstanding. Dimensional Fund Advisors L.P. is the second largest shareholder with 6.0% of common stock, followed by Vinva Investment Management, holding 5.0% of the stock.

On studying our ownership data, we found that 15 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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 Western Areas

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. 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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our information suggests that Western Areas Limited insiders own under 1% of the company. However, it’s possible that insiders might have an indirect interest through a more complex structure. It appears that the board holds about AU$3.0m worth of stock. This compares to a market capitalization of AU$780m. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, mostly retail investors, hold a substantial 57% stake in WSA, suggesting it is a fairly popular stock. This size of ownership gives retail investors collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand Western Areas better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.