Retail investors who have a significant stake must be disappointed along with institutions after Sims Limited's (ASX:SGM) market cap dropped by AU$284m

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Simply Wall St

Sun, Sep 17, 2023, 4:01 PM 4 min read

Key Insights

Sims' significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
The top 25 shareholders own 46% of the company
Institutional ownership in Sims is 47%

A look at the shareholders of Sims Limited (ASX:SGM) can tell us which group is most powerful. With 52% stake, retail investors possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Following a 9.6% decrease in the stock price last week, retail investors suffered the most losses, but institutions who own 47% stock also took a hit.

Let's delve deeper into each type of owner of Sims, beginning with the chart below.

Check out our latest analysis for Sims

ownership-breakdown — ASX:SGM Ownership Breakdown September 17th 2023

What Does The Institutional Ownership Tell Us About Sims?

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.

As you can see, institutional investors have a fair amount of stake in Sims. 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 Sims, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth — ASX:SGM Earnings and Revenue Growth September 17th 2023

Sims is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is Orbis Investment Management Limited with 16% of shares outstanding. Yarra Funds Management Limited is the second largest shareholder owning 5.1% of common stock, and BlackRock, Inc. holds about 4.9% of the company stock.

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 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 Sims

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.

Our information suggests that Sims Limited insiders own under 1% of the company. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own AU$19m worth of shares. 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, mostly comprising of individual investors, collectively holds 52% of Sims shares. 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. Case in point: We've spotted 2 warning signs for Sims you should be aware of.

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.

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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.