Painful week for retail investors invested in Platinum Group Metals Ltd. (TSE:PTM) after 12% drop, institutions also suffered losses

Key Insights

• Significant control over Platinum Group Metals by retail investors implies that the general public has more power to influence management and governance-related decisions
• A total of 6 investors have a majority stake in the company with 51% ownership
• Insiders have sold recently

To get a sense of who is truly in control of Platinum Group Metals Ltd. (TSE:PTM), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 44% to be precise, is retail investors. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While the holdings of retail investors took a hit after last week’s 12% price drop, institutions with their 30% holdings also suffered.

Let's delve deeper into each type of owner of Platinum Group Metals, beginning with the chart below.

Check out our latest analysis for Platinum Group Metals

What Does The Institutional Ownership Tell Us About Platinum Group Metals?

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.

We can see that Platinum Group Metals does have institutional investors; and they hold a good portion of the company's stock. 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 Platinum Group Metals' 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 Platinum Group Metals. Hosken Consolidated Investments Limited is currently the largest shareholder, with 26% of shares outstanding. With 10% and 6.9% of the shares outstanding respectively, Franklin Resources, Inc. and Kopernik Global Investors, LLC are the second and third largest shareholders.

We also observed that the top 6 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Platinum Group Metals

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.

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.

Our information suggests that Platinum Group Metals Ltd. insiders own under 1% of the company. It seems the board members have no more than CA$545k worth of shares in the CA$179m company. 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, who are usually individual investors, hold a 44% stake in Platinum Group Metals. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Public Company Ownership

We can see that public companies hold 26% of the Platinum Group Metals shares on issue. 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:

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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Platinum Group Metals , and understanding them should be part of your investment process.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.