While institutions invested in Silicom Ltd. (NASDAQ:SILC) benefited from last week's 10.0% gain, retail investors stood to gain the most

Key Insights

• Significant control over Silicom by retail investors implies that the general public has more power to influence management and governance-related decisions
• A total of 25 investors have a majority stake in the company with 46% ownership
• Institutions own 41% of Silicom

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To get a sense of who is truly in control of Silicom Ltd. (NASDAQ:SILC), it is important to understand the ownership structure of the business. We can see that retail investors own the lion's share in the company with 54% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While retail investors were the group that benefitted the most from last week’s US$9.6m market cap gain, institutions too had a 41% share in those profits.

In the chart below, we zoom in on the different ownership groups of Silicom.

See our latest analysis for Silicom

What Does The Institutional Ownership Tell Us About Silicom?

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.

Silicom already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Silicom, (below). Of course, keep in mind that there are other factors to consider, too.

Silicom is not owned by hedge funds. Systematic Financial Management LP is currently the company's largest shareholder with 9.3% of shares outstanding. For context, the second largest shareholder holds about 6.9% of the shares outstanding, followed by an ownership of 5.9% by the third-largest shareholder.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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. 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 Silicom

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

We can report that insiders do own shares in Silicom Ltd.. As individuals, the insiders collectively own US$4.9m worth of the US$101m company. Some would say this shows alignment of interests between shareholders and the board, though we generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public -- including retail investors -- own 54% of Silicom. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Silicom better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Silicom .

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.