The considerable ownership by individual investors in Rainbow Rare Earths indicates that they collectively have a greater say in management and business strategy
A total of 15 investors have a majority stake in the company with 43% ownership
Every investor in Rainbow Rare Earths Limited (LON:RBW) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 57% to be precise, is individual investors. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Individual insiders, on the other hand, account for 24% of the company's stockholders. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies.
Let's delve deeper into each type of owner of Rainbow Rare Earths, beginning with the chart below.
What Does The Lack Of Institutional Ownership Tell Us About Rainbow Rare Earths?
We don't tend to see institutional investors holding stock of companies that are very risky, thinly traded, or very small. Though we do sometimes see large companies without institutions on the register, it's not particularly common.
There are multiple explanations for why institutions don't own a stock. The most common is that the company is too small relative to funds under management, so the institution does not bother to look closely at the company. It is also possible that fund managers don't own the stock because they aren't convinced it will perform well. Rainbow Rare Earths' earnings and revenue track record (below) may not be compelling to institutional investors -- or they simply might not have looked at the business closely.
LSE:RBW Earnings and Revenue Growth October 27th 2024
Hedge funds don't have many shares in Rainbow Rare Earths. Adonis Pouroulis is currently the largest shareholder, with 14% of shares outstanding. For context, the second largest shareholder holds about 12% of the shares outstanding, followed by an ownership of 6.2% by the third-largest shareholder. George Sidney Bennett, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.
A deeper look at our ownership data shows that the top 15 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.
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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.
Insider Ownership Of Rainbow Rare Earths
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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.
It seems insiders own a significant proportion of Rainbow Rare Earths Limited. Insiders have a UK£19m stake in this UK£79m business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.
General Public Ownership
The general public, who are usually individual investors, hold a substantial 57% stake in Rainbow Rare Earths, suggesting it is a fairly popular stock. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.
Private Company Ownership
It seems that Private Companies own 18%, of the Rainbow Rare Earths stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Rainbow Rare Earths better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with Rainbow Rare Earths .
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.
