What Is The Ownership Structure Like For Largo Resources Ltd. (TSE:LGO)?

By
Simply Wall St
Published
June 10, 2021
TSX:LGO
Source: Shutterstock

The big shareholder groups in Largo Resources Ltd. (TSE:LGO) have power over the company. 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.

Largo Resources isn't enormous, but it's not particularly small either. It has a market capitalization of CA$1.2b, which means it would generally expect to see some institutions on the share registry. In the chart below, we can see that institutions own shares in the company. Let's delve deeper into each type of owner, to discover more about Largo Resources.

Check out our latest analysis for Largo Resources

ownership-breakdown
TSX:LGO Ownership Breakdown June 10th 2021

What Does The Institutional Ownership Tell Us About Largo Resources?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

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

earnings-and-revenue-growth
TSX:LGO Earnings and Revenue Growth June 10th 2021

We note that hedge funds don't have a meaningful investment in Largo Resources. Arias Resource Capital Management LP is currently the largest shareholder, with 43% of shares outstanding. West Family Investments, Inc. is the second largest shareholder owning 7.4% of common stock, and Grantham Mayo Van Otterloo & Co. LLC holds about 2.0% of the company stock.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. 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 Largo Resources

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 less than 1% of Largo Resources Ltd.. It appears that the board holds about CA$4.6m worth of stock. This compares to a market capitalization of CA$1.2b. 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 holds a 44% stake in Largo 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.

Private Equity Ownership

With a stake of 43%, private equity firms could influence the Largo Resources board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

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 example, we've discovered 2 warning signs for Largo Resources (1 can't be ignored!) that you should be aware of before investing here.

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. 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.
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