To get a sense of who is truly in control of West African Resources Limited (ASX:WAF), it is important to understand the ownership structure of the business. We can see that institutions own the lion's share in the company with 58% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).
And things are looking up for institutional investors after the company gained AU$151m in market cap last week. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 136%.
In the chart below, we zoom in on the different ownership groups of West African Resources.
What Does The Institutional Ownership Tell Us About West African Resources?
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.
We can see that West African Resources 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. 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 West African Resources' historic earnings and revenue below, but keep in mind there's always more to the story.
ASX:WAF Earnings and Revenue Growth October 24th 2024
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. West African Resources is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is L1 Capital Pty. Limited with 8.9% of shares outstanding. For context, the second largest shareholder holds about 8.7% of the shares outstanding, followed by an ownership of 5.0% by the third-largest shareholder. In addition, we found that Richard Hyde, the CEO has 1.5% of the shares allocated to their name.
A closer look at our ownership figures suggests that the top 11 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.
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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.
Insider Ownership Of West African Resources
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 most recent data indicates that insiders own some shares in West African Resources Limited. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around AU$94m worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.
General Public Ownership
With a 35% ownership, the general public, mostly comprising of individual investors, have some degree of sway over West African Resources. 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.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 3 warning signs for West African Resources (1 shouldn't be ignored!) that you should be aware of before investing here.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this freereport on analyst forecasts.
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.
