Every investor in TerraCom Limited (ASX:TER) should be aware of the most powerful shareholder groups. We can see that individual investors own the lion's share in the company with 38% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Individual investors gained the most after market cap touched AU$160m last week, while institutions who own 36% also benefitted.
In the chart below, we zoom in on the different ownership groups of TerraCom.
What Does The Institutional Ownership Tell Us About TerraCom?
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.
TerraCom already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 TerraCom, (below). Of course, keep in mind that there are other factors to consider, too.
ASX:TER Earnings and Revenue Growth August 12th 2024
It looks like hedge funds own 14% of TerraCom shares. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Regal Partners Limited is currently the largest shareholder, with 14% of shares outstanding. Bonython Coal No 1 Pty Limited, Asset Management Arm is the second largest shareholder owning 9.8% of common stock, and TIGA Trading Pty Ltd, Asset Management Arm holds about 7.3% of the company stock.
We also observed that the top 10 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.
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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.
Insider Ownership Of TerraCom
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
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 most recent data indicates that insiders own some shares in TerraCom Limited. As individuals, the insiders collectively own AU$12m worth of the AU$160m 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 38% stake in the company, and hence can't easily be ignored. 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.
Private Company Ownership
Our data indicates that Private Companies hold 4.7%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand TerraCom better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for TerraCom (of which 1 makes us a bit uncomfortable!) you should know about.
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.
