Given the large stake in the stock by institutions, Piedmont Lithium's stock price might be vulnerable to their trading decisions
50% of the business is held by the top 19 shareholders
Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company
If you want to know who really controls Piedmont Lithium Inc. (ASX:PLL), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 54% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
Because institutional owners have a huge pool of resources and liquidity, their investing decisions tend to carry a great deal of weight, especially with individual investors. As a result, a sizeable amount of institutional money invested in a firm is generally viewed as a positive attribute.
In the chart below, we zoom in on the different ownership groups of Piedmont Lithium.
What Does The Institutional Ownership Tell Us About Piedmont Lithium?
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.
Piedmont Lithium 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Piedmont Lithium's historic earnings and revenue below, but keep in mind there's always more to the story.
ASX:PLL Earnings and Revenue Growth March 25th 2024
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Piedmont Lithium is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is State Street Global Advisors, Inc. with 9.5% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.6% and 5.7%, of the shares outstanding, respectively. Additionally, the company's CEO Keith Phillips directly holds 0.7% of the total shares outstanding.
After doing some more digging, we found that the top 19 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.
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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of Piedmont Lithium
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.
With a 34% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Piedmont Lithium. 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.
Public Company Ownership
It appears to us that public companies own 5.7% of Piedmont Lithium. It's hard to say for sure but this suggests they have entwined business interests. This might be a strategic stake, so it's worth watching this space for changes in ownership.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Piedmont Lithium better, we need to consider many other factors.
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.
