Institutional investors control 77% of Pan African Resources PLC (LON:PAF) and were rewarded last week after stock increased 12%

Key Insights

• Institutions' substantial holdings in Pan African Resources implies that they have significant influence over the company's share price
• A total of 6 investors have a majority stake in the company with 50% ownership
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

Every investor in Pan African Resources PLC (LON:PAF) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 77% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And things are looking up for institutional investors after the company gained UK£91m in market cap last week. One-year return to shareholders is currently 144% and last week’s gain was the icing on the cake.

Let's delve deeper into each type of owner of Pan African Resources, beginning with the chart below.

See our latest analysis for Pan African Resources

What Does The Institutional Ownership Tell Us About Pan African 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.

As you can see, institutional investors have a fair amount of stake in Pan African Resources. 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 Pan African Resources, (below). Of course, keep in mind that there are other factors to consider, too.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. Pan African Resources is not owned by hedge funds. The company's largest shareholder is Allan Gray Proprietary Ltd., with ownership of 15%. South Africa is the second largest shareholder owning 11% of common stock, and Public Investment Corporation Limited holds about 10.0% of the company stock.

We did some more digging and found that 6 of the top shareholders account for roughly 50% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Pan African Resources

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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 information suggests that Pan African Resources PLC insiders own under 1% of the company. Keep in mind that it's a big company, and the insiders own UK£6.3m worth of shares. The absolute value might be more important than the proportional share. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 10% stake in Pan African Resources. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

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 example, we've discovered 3 warning signs for Pan African Resources (1 doesn't sit too well with us!) 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. 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.