Institutions' substantial holdings in Lynas Rare Earths implies that they have significant influence over the company's share price
The top 9 shareholders own 52% of the company
Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business
Every investor in Lynas Rare Earths Limited (ASX:LYC) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 57% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
As a result, institutional investors endured the highest losses last week after market cap fell by AU$355m. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 4.9% for shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the downtrend continues, institutions may face pressures to sell Lynas Rare Earths, which might have negative implications on individual investors.
Let's delve deeper into each type of owner of Lynas Rare Earths, beginning with the chart below.
What Does The Institutional Ownership Tell Us About Lynas Rare Earths?
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 Lynas Rare Earths 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. 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.
ASX:LYC Earnings and Revenue Growth December 19th 2024
Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in Lynas Rare Earths. Australian Super Pty Ltd is currently the company's largest shareholder with 8.5% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.4% and 7.1% of the stock.
On further inspection, we found that more than half the company's shares are owned by the top 9 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
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. 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. 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 information suggests that Lynas Rare Earths Limited insiders own under 1% of the company. We do note, however, it is possible insiders have an indirect interest through a private company or other corporate structure. Keep in mind that it's a big company, and the insiders own AU$25m worth of shares. The absolute value might be more important than the proportional share. Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.
General Public Ownership
The general public-- including retail investors -- own 32% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Company Ownership
We can see that Private Companies own 10%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - Lynas Rare Earths has 2 warning signs (and 1 which is potentially serious) we think 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.
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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.
