NEWS
NEWS
©SIMPLY WALL ST — (January 26, 2021)
A look at the shareholders of Poseidon Nickel Limited (ASX:POS) can tell us which group is most powerful. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. We also tend to see lower insider ownership in companies that were previously publicly owned.
Poseidon Nickel is not a large company by global standards. It has a market capitalization of AU$228m, which means it wouldn’t have the attention of many institutional investors. In the chart below, we can see that institutional investors have bought into the company. Let’s take a closer look to see what the different types of shareholders can tell us about Poseidon Nickel.
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 Poseidon Nickel. 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 Poseidon Nickel’s historic earnings and revenue below, but keep in mind there’s always more to the story.
We note that hedge funds don’t have a meaningful investment in Poseidon Nickel. Black Mountain Metals LLC is currently the largest shareholder, with 20% of shares outstanding. For context, the second largest shareholder holds about 11% of the shares outstanding, followed by an ownership of 4.5% by the third-largest shareholder.
We did some more digging and found that 10 of the top shareholders account for roughly 50% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.
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. We’re not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.
The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.
We can see that insiders own shares in Poseidon Nickel Limited. It has a market capitalization of just AU$228m, and insiders have AU$7.8m worth of shares, in their own names. Some would say this shows alignment of interests between shareholders and the board, though I generally prefer to see bigger insider holdings. But it might be worth checking if those insiders have been selling.
The general public holds a 47% stake in Poseidon Nickel. 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.
It seems that Private Companies own 21%, of the Poseidon Nickel stock. It’s hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.
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