Lynas Rare Earths Limited's (ASX:LYC) market cap dropped AU$679m last week; individual investors who hold 59% were hit as were institutions
The considerable ownership by individual investors in Lynas Rare Earths indicates that they collectively have a greater say in management and business strategy
The top 25 shareholders own 38% of the company
To get a sense of who is truly in control of Lynas Rare Earths Limited (ASX:LYC), it is important to understand the ownership structure of the business. With 59% stake, individual investors 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.
While institutions, who own 40% shares weren’t spared from last week’s AU$679m market cap drop, individual investors as a group suffered the maximum losses
Let's take a closer look to see what the different types of shareholders can tell us about Lynas Rare Earths.
View our latest analysis for Lynas Rare Earths
What Does The Institutional Ownership Tell Us About Lynas Rare Earths?
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.
We can see that Lynas Rare Earths does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Lynas Rare Earths' earnings history below. Of course, the future is what really matters.
Hedge funds don't have many shares in Lynas Rare Earths. Our data shows that BlackRock, Inc. is the largest shareholder with 6.0% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 5.1% and 4.9%, of the shares outstanding, respectively.
Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.
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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of Lynas Rare Earths
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.
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.
Our data suggests that insiders own under 1% of Lynas Rare Earths Limited in their own names. Keep in mind that it's a big company, and the insiders own AU$32m worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.
General Public Ownership
The general public, who are usually individual investors, hold a substantial 59% stake in Lynas Rare Earths, suggesting it is a fairly popular stock. 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.
I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 1 warning sign we've spotted with Lynas Rare Earths .
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.
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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.
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