Lucara Diamond Corp.'s (TSE:LUC) largest shareholders are retail investors who were rewarded as market cap surged CA$23m last week

Key Insights

• Significant control over Lucara Diamond by retail investors implies that the general public has more power to influence management and governance-related decisions
• A total of 20 investors have a majority stake in the company with 42% ownership
• Institutional ownership in Lucara Diamond is 16%

To get a sense of who is truly in control of Lucara Diamond Corp. (TSE:LUC), it is important to understand the ownership structure of the business. With 58% stake, retail investors possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, retail investors collectively scored the highest last week as the company hit CA$226m market cap following a 11% gain in the stock.

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

Check out our latest analysis for Lucara Diamond

What Does The Institutional Ownership Tell Us About Lucara Diamond?

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.

Lucara Diamond already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Lucara Diamond's historic earnings and revenue below, but keep in mind there's always more to the story.

Lucara Diamond is not owned by hedge funds. Nemesia S.À R.L. is currently the largest shareholder, with 25% of shares outstanding. For context, the second largest shareholder holds about 14% of the shares outstanding, followed by an ownership of 1.2% by the third-largest shareholder.

On studying our ownership data, we found that 20 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Lucara Diamond

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 Lucara Diamond Corp.. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. It appears that the board holds about CA$1.4m worth of stock. This compares to a market capitalization of CA$226m. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.

General Public Ownership

The general public -- including retail investors -- own 58% of Lucara Diamond. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Private Company Ownership

Our data indicates that Private Companies hold 25%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

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 Lucara Diamond (1 can't be ignored!) that you should be aware of before investing here.

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.