Lithium Ionic Corp.'s (CVE:LTH) stock price dropped 15% last week; retail investors would not be happy

editorial-team@simplywallst.com (Simply Wall St)

Wed, Jan 10, 2024, 3:52 AM 4 min read

Key Insights

The considerable ownership by retail investors in Lithium Ionic indicates that they collectively have a greater say in management and business strategy
A total of 25 investors have a majority stake in the company with 48% ownership
Recent purchases by insiders

If you want to know who really controls Lithium Ionic Corp. (CVE:LTH), then you'll have to look at the makeup of its share registry. The group holding the most number of shares in the company, around 52% to be precise, is retail investors. Put another way, the group faces the maximum upside potential (or downside risk).

While insiders who own 24% came under pressure after market cap dropped to CA$185m last week,retail investors took the most losses.

Let's take a closer look to see what the different types of shareholders can tell us about Lithium Ionic.

Check out our latest analysis for Lithium Ionic

ownership-breakdown — TSXV:LTH Ownership Breakdown January 10th 2024

What Does The Institutional Ownership Tell Us About Lithium Ionic?

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 Lithium Ionic does have institutional investors; and they hold a good portion of the company's stock. 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. 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 Lithium Ionic, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth — TSXV:LTH Earnings and Revenue Growth January 10th 2024

It would appear that 8.1% of Lithium Ionic shares are controlled by hedge funds. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. The company's largest shareholder is Waratah Capital Advisors Ltd., with ownership of 8.1%. With 7.2% and 6.2% of the shares outstanding respectively, Scotia Asset Management L.P. and Helio Diniz are the second and third largest shareholders. Helio Diniz, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.

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.

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 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 Lithium Ionic

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.

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.

It seems insiders own a significant proportion of Lithium Ionic Corp.. It has a market capitalization of just CA$185m, and insiders have CA$45m worth of shares in their own names. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a substantial 52% stake in Lithium Ionic, 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.

Next Steps:

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 learn about the 3 warning signs we've spotted with Lithium Ionic (including 2 which are potentially serious) .

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.