While institutions invested in AXT, Inc. (NASDAQ:AXTI) benefited from last week's 18% gain, retail investors stood to gain the most

Key Insights

• The considerable ownership by retail investors in AXT indicates that they collectively have a greater say in management and business strategy
• The top 25 shareholders own 40% of the company
• Recent sales by insiders

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To get a sense of who is truly in control of AXT, Inc. (NASDAQ:AXTI), it is important to understand the ownership structure of the business. With 58% stake, retail investors possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

While retail investors were the group that reaped the most benefits after last week’s 18% price gain, institutions also received a 28% cut.

In the chart below, we zoom in on the different ownership groups of AXT.

See our latest analysis for AXT

What Does The Institutional Ownership Tell Us About AXT?

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.

As you can see, institutional investors have a fair amount of stake in AXT. 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 AXT's historic earnings and revenue below, but keep in mind there's always more to the story.

It looks like hedge funds own 6.6% of AXT shares. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Cleveland Capital Management, LLC is currently the company's largest shareholder with 6.6% of shares outstanding. In comparison, the second and third largest shareholders hold about 5.5% and 4.9% of the stock. Morris Young, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of AXT

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Shareholders would probably be interested to learn that insiders own shares in AXT, Inc.. In their own names, insiders own US$40m worth of stock in the US$518m company. It is good to see some investment by insiders, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a substantial 58% stake in AXT, suggesting it is a fairly popular stock. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand AXT better, we need to consider many other factors. For instance, we've identified 2 warning signs for AXT that you should be aware of.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report 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.