NOVONIX Limited's (ASX:NVX) market cap surged AU$37m last week, retail investors who have a lot riding on the company were rewarded

Key Insights

• Significant control over NOVONIX by retail investors implies that the general public has more power to influence management and governance-related decisions
• A total of 25 investors have a majority stake in the company with 40% ownership
• 12% of NOVONIX is held by insiders

To get a sense of who is truly in control of NOVONIX Limited (ASX:NVX), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are retail investors with 59% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Clearly, retail investors benefitted the most after the company's market cap rose by AU$37m last week.

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

Check out our latest analysis for NOVONIX

What Does The Institutional Ownership Tell Us About NOVONIX?

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 NOVONIX. 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 NOVONIX, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in NOVONIX. Phillips 66 is currently the company's largest shareholder with 16% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 4.1% and 3.9%, of the shares outstanding, respectively. Furthermore, CEO John Burns is the owner of 0.7% of the company's shares.

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 is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of NOVONIX

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 NOVONIX Limited. It has a market capitalization of just AU$342m, and insiders have AU$40m worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public, mostly comprising of individual investors, collectively holds 59% of NOVONIX shares. 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.

Public Company Ownership

Public companies currently own 16% of NOVONIX stock. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with NOVONIX , and understanding them should be part of your investment process.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.