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While insiders own 26% of LGI Limited (ASX:LGI), private companies are its largest shareholders with 37% ownership

Key Insights

  • LGI's significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public

  • 53% of the business is held by the top 4 shareholders

  • Insiders have been selling lately

If you want to know who really controls LGI Limited (ASX:LGI), then you'll have to look at the makeup of its share registry. With 37% stake, private companies possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

And individual insiders on the other hand have a 26% ownership in the company. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies.

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Let's take a closer look to see what the different types of shareholders can tell us about LGI.

View our latest analysis for LGI

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About LGI?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that LGI does have institutional investors; and they hold a good portion of the company's stock. 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 LGI's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
earnings-and-revenue-growth

We note that hedge funds don't have a meaningful investment in LGI. Looking at our data, we can see that the largest shareholder is Blakin Technologies Pty Ltd with 20% of shares outstanding. For context, the second largest shareholder holds about 15% of the shares outstanding, followed by an ownership of 10% by the third-largest shareholder.

Our research also brought to light the fact that roughly 53% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of LGI

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.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

Our information suggests that insiders maintain a significant holding in LGI Limited. Insiders have a AU$67m stake in this AU$263m business. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

With a 24% ownership, the general public, mostly comprising of individual investors, have some degree of sway over LGI. 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 Company Ownership

Our data indicates that Private Companies hold 37%, of the company's shares. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

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. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for LGI (of which 1 is a bit concerning!) you should know about.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.