Can We See Significant Insider Ownership On The Horizon Petroleum Ltd. (CVE:HPL) Share Register?

A look at the shareholders of Horizon Petroleum Ltd. (CVE:HPL) can tell us which group is most powerful. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. Warren Buffett said that he likes ‘a business with enduring competitive advantages that is run by able and owner-oriented people’. So it’s nice to see some insider ownership, because it may suggest that management is owner-oriented.

Horizon Petroleum is not a large company by global standards. It has a market capitalization of CA$2.1m, which means it wouldn’t have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it’s seems that institutions don’t own shares in the company. Let’s take a closer look to see what the different types of shareholder can tell us about Horizon Petroleum.

View 6 warning signs we detected for Horizon Petroleum

TSXV:HPL Ownership Summary, December 20th 2019
TSXV:HPL Ownership Summary, December 20th 2019

What Does The Lack Of Institutional Ownership Tell Us About Horizon Petroleum?

Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it’s unusual to see larger companies without any institutional investors.

There are multiple explanations for why institutions don’t own a stock. The most common is that the company is too small relative to fund under management, so the institition does not bother to look closely at the company. On the other hand, it’s always possible that professional investors are avoiding a company because they don’t think it’s the best place for their money. Horizon Petroleum might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

TSXV:HPL Income Statement, December 20th 2019
TSXV:HPL Income Statement, December 20th 2019

Horizon Petroleum is not owned by hedge funds. CruzSur Energy Corp. is currently the company’s largest shareholder with 20% of shares outstanding, David Winter is the second largest shareholder with 3.7% of common stock, followed by Yogeshwar Sharma, holding 2.1% of the stock. They also hold the title of Chief Executive Officer and Chairman of the Board, respectively, suggesting that these insiders have a personal stake in the company.

On studying our ownership data, we found that 5 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Horizon Petroleum

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. 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.

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.

Our most recent data indicates that insiders own some shares in Horizon Petroleum Ltd.. In their own names, insiders own CA$186k worth of stock in the CA$2.1m company. 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.

General Public Ownership

The general public — mostly retail investors — own 71% of Horizon Petroleum. This size of ownership gives retail investors collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Public Company Ownership

We can see that public companies hold 20%, of the HPL shares on issue. It’s hard to say for sure, but this suggests they have entwined business interests. This might be a strategic stake, so it’s worth watching this space for changes in ownership.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand Horizon Petroleum better, we need to consider many other factors.

For example, we’ve discovered 6 warning signs for Horizon Petroleum (of which 4 are major) which any shareholder or potential investor should be aware of.

If you would prefer check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, backed by strong financial data.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.