Appen Limited (ASX:APX) surges 12%; retail investors who own 47% shares profited along with institutions

Key Insights

• The considerable ownership by retail investors in Appen indicates that they collectively have a greater say in management and business strategy
• The top 21 shareholders own 50% of the company
• Insider ownership in Appen is 10%

If you want to know who really controls Appen Limited (ASX:APX), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are retail investors with 47% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While retail investors were the group that benefitted the most from last week’s AU$47m market cap gain, institutions too had a 39% share in those profits.

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

Check out our latest analysis for Appen

What Does The Institutional Ownership Tell Us About Appen?

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.

Appen already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Appen's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Appen. Looking at our data, we can see that the largest shareholder is Spheria Asset Management Pty Ltd with 4.8% of shares outstanding. In comparison, the second and third largest shareholders hold about 4.3% and 3.8% of the stock.

A closer look at our ownership figures suggests that the top 21 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Appen

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 a reasonable proportion of Appen Limited. Insiders own AU$43m worth of shares in the AU$417m company. 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, who are usually individual investors, hold a 47% stake in Appen. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Company Ownership

Our data indicates that Private Companies hold 3.5%, of the company's shares. 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:

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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Appen (at least 1 which is significant) , and understanding them should be part of your investment process.

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.