Key Insights
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Given the large stake in the stock by institutions, Lithium Royalty’s stock price might be vulnerable to their trading decisions
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55% of the company is held by a single shareholder (Waratah Capital Advisors Ltd.)
Every investor in Lithium Royalty Corp. (TSE:LIRC) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are hedge funds with 55% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Since hedge funds have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Hence, having a considerable amount of institutional money invested in a company is often regarded as a desirable trait.
Let’s take a closer look to see what the different types of shareholders can tell us about Lithium Royalty.
Check out our latest analysis for Lithium Royalty
What Does The Institutional Ownership Tell Us About Lithium Royalty?
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 Lithium Royalty. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It’s therefore worth looking at Lithium Royalty’s earnings history below. Of course, the future is what really matters.
It would appear that 55% of Lithium Royalty shares are controlled by hedge funds. That’s interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. The company’s largest shareholder is Waratah Capital Advisors Ltd., with ownership of 55%. This implies that they have majority interest control of the future of the company. In comparison, the second and third largest shareholders hold about 29% and 2.0% of the stock.
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 Lithium Royalty
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 data suggests that insiders own under 1% of Lithium Royalty Corp. in their own names. It has a market capitalization of just CA$377m, and the board has only CA$2.9m worth of shares in their own names. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.
General Public Ownership
With a 10% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Lithium Royalty. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.
Private Equity Ownership
With a stake of 29%, private equity firms could influence the Lithium Royalty board. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and — as the name suggests — don’t invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.
Next Steps:
It’s always worth thinking about the different groups who own shares in a company. But to understand Lithium Royalty better, we need to consider many other factors.
Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
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.
