Individual investors who hold 59% of Appen Limited (ASX:APX) gained 19%, institutions profited as well

Key Insights

• Appen's significant individual investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• The top 25 shareholders own 40% of the company
• Institutional ownership in Appen is 29%

A look at the shareholders of Appen Limited (ASX:APX) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are individual investors with 59% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Following a 19% increase in the stock price last week, individual investors profited the most, but institutions who own 29% stock also stood to gain from the increase.

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

View 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.

As you can see, institutional investors have a fair amount of stake in Appen. 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. 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 Appen's historic earnings and revenue below, but keep in mind there's always more to the story.

Appen is not owned by hedge funds. Our data shows that Spheria Asset Management Pty Ltd is the largest shareholder with 4.1% of shares outstanding. With 3.7% and 3.3% of the shares outstanding respectively, Christopher Vonwiller and Morgan Stanley, Investment Banking and Brokerage Investments are the second and third largest shareholders.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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 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.

We can see that insiders own shares in Appen Limited. As individuals, the insiders collectively own AU$58m worth of the AU$665m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public -- including retail investors -- own 59% of Appen. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 2 warning signs for Appen that you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.