Institutions profited after Sigma Lithium Corporation's (NASDAQ:SGML) market cap rose US$96m last week but private equity firms profited the most

Key Insights

• Sigma Lithium's significant private equity firms ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 3 investors have a majority stake in the company with 53% ownership
• 37% of Sigma Lithium is held by Institutions

Every investor in Sigma Lithium Corporation (NASDAQ:SGML) should be aware of the most powerful shareholder groups. We can see that private equity firms own the lion's share in the company with 44% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While private equity firms were the group that benefitted the most from last week’s US$96m market cap gain, institutions too had a 37% share in those profits.

Let's delve deeper into each type of owner of Sigma Lithium, beginning with the chart below.

See our latest analysis for Sigma Lithium

What Does The Institutional Ownership Tell Us About Sigma Lithium?

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.

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

We note that hedge funds don't have a meaningful investment in Sigma Lithium. A10 Investimentos Ltda. is currently the largest shareholder, with 44% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 4.9% and 4.8%, of the shares outstanding, respectively.

A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 53% stake.

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. 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 Sigma Lithium

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.

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.

We can report that insiders do own shares in Sigma Lithium Corporation. This is a big company, so it is good to see this level of alignment. Insiders own US$36m worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 14% stake in Sigma Lithium. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With an ownership of 44%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. 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.

Private Company Ownership

We can see that Private Companies own 3.2%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

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. Take risks for example - Sigma Lithium has 1 warning sign we think 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com