To get an idea of who really controls Silver Lake Resources Limited (ASX: SLR), it is important to understand the ownership structure of the business. With 53% of the capital, the institutions hold the maximum number of shares in the company. In other words, the group is likely to gain the most (or lose the most) from its investment in the business.
Institutional investors would appreciate last week’s 8.5% rise in share prices, given that their one-year returns were a disappointing 28%.
Let’s dig deeper into each type of owner in Silver Lake Resources, starting with the table below.
What does institutional ownership tell us about Silver Lake’s 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 is included in a major index. We would expect most companies to have some institutions listed, especially if they are growing.
As you can see, institutional investors own a sizeable portion of Silver Lake Resources. This may indicate that the company has some degree of credibility in the investment community. However, it is best to be wary of relying on the so-called validation that accompanies institutional investors. They are also sometimes wrong. When multiple institutions hold a stock, there is always a risk that they are in a “crowded trade”. When such a transaction goes wrong, multiple parties may compete to quickly sell shares. This risk is higher in a company with no history of growth. You can see Silver Lake Resources’ historical revenue and earnings below, but keep in mind there’s always more to tell.
Institutional investors own more than 50% of the company, so together they can probably heavily influence board decisions. We note that hedge funds have no significant investment in Silver Lake Resources. Van Eck Associates Corporation is currently the largest shareholder, with 11% of the shares outstanding. For context, the second largest shareholder owns approximately 5.6% of the outstanding shares, followed by 5.0% ownership by the third largest shareholder.
After digging a little deeper, we found that the top 21 held combined ownership of 50% of the company, suggesting that no single shareholder has significant control over the company.
While it makes sense to study data on a company’s institutional ownership, it also makes sense to study analyst sentiment to find out which way the wind is blowing. A number of analysts cover the stock, so you can look at growth forecasts quite easily.
Silver Lake Resource Insider Ownership
The definition of an insider may differ slightly from country to country, but board members still matter. The management of the company answers to the board of directors and the latter must represent the interests of the shareholders. In particular, sometimes the senior executives themselves sit on the board of directors.
Insider ownership is positive when it signals that executives think like the true owners of the company. However, strong insider ownership can also give immense power to a small group within the company. This can be negative in certain circumstances.
Our data suggests that insiders hold less than 1% of Silver Lake Resources Limited in their own name. But they may have an indirect interest through a corporate structure that we have not noted. It has a market capitalization of just A$1.1 billion and the board holds just A$4.3 million worth of shares in its own name. Many tend to prefer to see a board with larger holdings. A good next step might be to take a look at this free summary of insider buying and selling.
General public property
With a 46% stake, the general public, consisting mainly of individual investors, has some influence over Silver Lake Resources. This size of ownership, although considerable, may not be sufficient to change company policy if the decision is not in line with other major shareholders.
I find it very interesting to see who exactly owns a company. But to really get insight, we also need to consider other information. For example, we have identified 3 warning signs for Silver Lake Resources of which you should be aware.
If you’re like me, you might want to ask yourself if this business will grow or shrink. Fortunately, you can check this free report showing analysts’ predictions for its future.
NB: The figures in this article are calculated using trailing twelve month data, which refers to the 12 month period ending on the last day of the month the financial statements are dated. This may not be consistent with the annual report figures for the full year.
Valuation is complex, but we help make it simple.
Find out if Silver Lake Resources is potentially overvalued or undervalued by viewing our full analysis, which includes fair value estimates, risks and warnings, dividends, insider trading and financial health.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.