Institutions profited after Sigma Lithium Corporation's (NASDAQ:SGML) market cap rose US$57m 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
• 53% of the business is held by the top 3 shareholders
• Insiders have been selling lately

To get a sense of who is truly in control of Sigma Lithium Corporation (NASDAQ:SGML), it is important to understand the ownership structure of the business. With 43% stake, private equity firms possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

While private equity firms were the group that benefitted the most from last week’s US$57m market cap gain, institutions too had a 39% share in those profits.

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

View our latest analysis for Sigma Lithium

What Does The Institutional Ownership Tell Us About Sigma Lithium?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Sigma Lithium's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Sigma Lithium. A10 Investimentos Ltda. is currently the company's largest shareholder with 43% of shares outstanding. In comparison, the second and third largest shareholders hold about 4.9% and 4.8% of the stock.

To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Sigma Lithium

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 most recent data indicates that insiders own some shares in Sigma Lithium Corporation. This is a big company, so it is good to see this level of alignment. Insiders own US$41m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

With a 12% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Sigma Lithium. 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.

Private Equity Ownership

Private equity firms hold a 43% stake in Sigma Lithium. This suggests they can be influential in key policy decisions. 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

Our data indicates that Private Companies hold 3.2%, 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. Take risks for example - Sigma Lithium has 2 warning signs we think you should be aware of.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.