With 47% ownership in Pure Cycle Corporation (NASDAQ:PCYO), institutional investors have a lot riding on the business

Key Insights

• Given the large stake in the stock by institutions, Pure Cycle's stock price might be vulnerable to their trading decisions
• The top 13 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

A look at the shareholders of Pure Cycle Corporation (NASDAQ:PCYO) can tell us which group is most powerful. We can see that institutions own the lion's share in the company with 47% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And things are looking up for institutional investors after the company gained US$37m in market cap last week. The one-year return on investment is currently 24% and last week's gain would have been more than welcomed.

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

See our latest analysis for Pure Cycle

What Does The Institutional Ownership Tell Us About Pure Cycle?

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.

Pure Cycle already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 Pure Cycle's earnings history below. Of course, the future is what really matters.

Our data indicates that hedge funds own 20% of Pure Cycle. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Plaisance Capital LLC is currently the largest shareholder, with 11% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 8.7% and 5.5%, of the shares outstanding, respectively. Additionally, the company's CEO Mark Harding directly holds 3.1% of the total shares outstanding.

A closer look at our ownership figures suggests that the top 13 shareholders have a combined ownership of 51% implying that no single shareholder has a majority.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Pure Cycle

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.

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.

Our most recent data indicates that insiders own some shares in Pure Cycle Corporation. It has a market capitalization of just US$276m, and insiders have US$9.7m worth of shares, in their own names. 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 30% 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 Pure Cycle better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Pure Cycle .

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.