Institutional owners may take dramatic actions as Aehr Test Systems, Inc.'s (NASDAQ:AEHR) recent 10% drop adds to one-year losses

Key Insights

• Significantly high institutional ownership implies Aehr Test Systems' stock price is sensitive to their trading actions
• The top 12 shareholders own 51% of the company
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

Every investor in Aehr Test Systems, Inc. (NASDAQ:AEHR) should be aware of the most powerful shareholder groups. With 77% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to US$333m last week after a 10% drop in the share price. The recent loss, which adds to a one-year loss of 57% for stockholders, may not sit well with this group of investors. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. As a result, if the decline continues, institutional investors may be pressured to sell Aehr Test Systems which might hurt individual investors.

In the chart below, we zoom in on the different ownership groups of Aehr Test Systems.

View our latest analysis for Aehr Test Systems

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

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 Aehr Test Systems. 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. 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 Aehr Test Systems, (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. Aehr Test Systems is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is FMR LLC with 10% of shares outstanding. For context, the second largest shareholder holds about 7.2% of the shares outstanding, followed by an ownership of 6.4% by the third-largest shareholder. Additionally, the company's CEO Gayn Erickson directly holds 1.2% of the total shares outstanding.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 12 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

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. 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.

We can see that insiders own shares in Aehr Test Systems, Inc.. It has a market capitalization of just US$333m, and insiders have US$20m worth of shares, in their own names. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

With a 18% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Aehr Test Systems. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

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. To that end, you should learn about the 3 warning signs we've spotted with Aehr Test Systems (including 1 which can't be ignored) .

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.

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

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.