Institutions profited after NextSource Materials Inc.'s (TSE:NEXT) market cap rose CA$15m last week but individual investors profited the most

Key Insights

• Significant control over NextSource Materials by individual investors implies that the general public has more power to influence management and governance-related decisions
• The top 9 shareholders own 49% of the company
• Institutional ownership in NextSource Materials is 48%

If you want to know who really controls NextSource Materials Inc. (TSE:NEXT), 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 individual investors with 51% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Following a 11% increase in the stock price last week, individual investors profited the most, but institutions who own 48% stock also stood to gain from the increase.

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

See our latest analysis for NextSource Materials

What Does The Institutional Ownership Tell Us About NextSource Materials?

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.

NextSource Materials 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. 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 NextSource Materials' historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in NextSource Materials. Vision Blue Resources Ltd. is currently the company's largest shareholder with 48% of shares outstanding. With 0.6% and 0.3% of the shares outstanding respectively, Brett Whalen and Marc Johnson are the second and third largest shareholders.

Our studies suggest that the top 9 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 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 is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of NextSource Materials

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Shareholders would probably be interested to learn that insiders own shares in NextSource Materials Inc.. In their own names, insiders own CA$2.3m worth of stock in the CA$147m company. It is good to see some investment by insiders, but we usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a substantial 51% stake in NextSource Materials, suggesting it is a fairly popular stock. 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:

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. For instance, we've identified 3 warning signs for NextSource Materials (1 is a bit unpleasant) 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.