Institutions profited after Petrofac Limited's (LON:PFC) market cap rose UK£16m last week but individual investors profited the most

Key Insights

• The considerable ownership by individual investors in Petrofac indicates that they collectively have a greater say in management and business strategy
• A total of 8 investors have a majority stake in the company with 50% ownership
• 17% of Petrofac is held by insiders

To get a sense of who is truly in control of Petrofac Limited (LON:PFC), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 57% to be precise, is individual investors. Put another way, the group faces the maximum upside potential (or downside risk).

While individual investors were the group that reaped the most benefits after last week’s 12% price gain, institutions also received a 26% cut.

Let's delve deeper into each type of owner of Petrofac, beginning with the chart below.

View our latest analysis for Petrofac

What Does The Institutional Ownership Tell Us About Petrofac?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

We can see that Petrofac 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. 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 Petrofac's earnings history below. Of course, the future is what really matters.

Hedge funds don't have many shares in Petrofac. The company's largest shareholder is Ayman Asfari, with ownership of 16%. In comparison, the second and third largest shareholders hold about 15% and 9.5% of the stock.

We did some more digging and found that 8 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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Petrofac

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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.

It seems insiders own a significant proportion of Petrofac Limited. It has a market capitalization of just UK£153m, and insiders have UK£25m worth of shares in their own names. 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

The general public, mostly comprising of individual investors, collectively holds 57% of Petrofac shares. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Petrofac (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

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.