Institutional owners may consider drastic measures as AXT, Inc.'s (NASDAQ:AXTI) recent US$26m drop adds to long-term losses

Key Insights

• Significantly high institutional ownership implies AXT's stock price is sensitive to their trading actions
• A total of 18 investors have a majority stake in the company with 50% ownership
• Insiders have sold recently

Every investor in AXT, Inc. (NASDAQ:AXTI) should be aware of the most powerful shareholder groups. With 59% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And institutional investors saw their holdings value drop by 15% last week. The recent loss, which adds to a one-year loss of 45% for stockholders, may not sit well with this group of investors. Also referred to as "smart money", institutions have a lot of sway over how a stock's price moves. Hence, if weakness in AXT's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

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

Check out our latest analysis for AXT

What Does The Institutional Ownership Tell Us About AXT?

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 AXT does have institutional investors; and they hold a good portion of the company's stock. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. 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 AXT's historic earnings and revenue below, but keep in mind there's always more to the story.

Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. We note that hedge funds don't have a meaningful investment in AXT. Dimensional Fund Advisors LP is currently the company's largest shareholder with 7.4% of shares outstanding. BlackRock, Inc. is the second largest shareholder owning 6.3% of common stock, and Morris Young holds about 4.9% of the company stock. Morris Young, who is the third-largest shareholder, also happens to hold the title of Chairman of the Board.

After doing some more digging, we found that the top 18 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

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

Insider Ownership Of AXT

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 AXT, Inc.. As individuals, the insiders collectively own US$10m worth of the US$150m company. This shows at least some alignment, but we usually like to see larger insider holdings. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 34% stake in AXT. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 2 warning signs for AXT (1 is a bit concerning!) that you should be aware of before investing here.

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.