Aehr Test Systems' (NASDAQ:AEHR) large institutional owners must be happy as stock continues to impress, up 10% over the past week

Key Insights

• Institutions' substantial holdings in Aehr Test Systems implies that they have significant influence over the company's share price
• The top 19 shareholders own 50% of the company
• Insiders have been selling lately

To get a sense of who is truly in control of Aehr Test Systems (NASDAQ:AEHR), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are institutions with 67% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And last week, institutional investors ended up benefitting the most after the company hit US$969m in market cap. One-year return to shareholders is currently 308% and last week’s gain was the icing on the cake.

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

Check out our latest analysis for Aehr Test Systems

What Does The Institutional Ownership Tell Us About Aehr Test Systems?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that Aehr Test Systems 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 Aehr Test Systems' historic earnings and revenue below, but keep in mind there's always more to the story.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Aehr Test Systems is not owned by hedge funds. Goldman Sachs Group, Investment Banking and Securities Investments is currently the company's largest shareholder with 6.8% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.4% and 4.8% of the stock. Additionally, the company's CEO Gayn Erickson directly holds 1.6% of the total shares outstanding.

A closer look at our ownership figures suggests that the top 19 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Aehr Test Systems

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

We can report that insiders do own shares in Aehr Test Systems. As individuals, the insiders collectively own US$61m worth of the US$969m company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public-- including retail investors -- own 27% stake in the company, and hence can't easily be ignored. 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Aehr Test Systems better, we need to consider many other factors. Be aware that Aehr Test Systems is showing 4 warning signs in our investment analysis , and 1 of those is concerning...

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.