Could NexGen Energy Ltd.’s (TSE:NXE) Investor Composition Influence The Stock Price?

If you want to know who really controls NexGen Energy Ltd. (TSE:NXE), then you’ll have to look at the makeup of its share registry. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. We also tend to see lower insider ownership in companies that were previously publicly owned.

NexGen Energy is a smaller company with a market capitalization of CA$585m, so it may still be flying under the radar of many institutional investors. Our analysis of the ownership of the company, below, shows that institutional investors have bought into the company. Let’s take a closer look to see what the different types of shareholder can tell us about NexGen Energy.

View our latest analysis for NexGen Energy

TSX:NXE Ownership Summary, January 17th 2020
TSX:NXE Ownership Summary, January 17th 2020

What Does The Institutional Ownership Tell Us About NexGen Energy?

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.

NexGen Energy already has institutions on the share registry. Indeed, they own 31% of the company. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of NexGen Energy, (below). Of course, keep in mind that there are other factors to consider, too.

TSX:NXE Income Statement, January 17th 2020
TSX:NXE Income Statement, January 17th 2020

Hedge funds don’t have many shares in NexGen Energy. Our data shows that Mega Uranium Ltd. is the largest shareholder with 5.4% of shares outstanding. The second largest shareholder with 3.8%, is Li Ka Shing (Overseas) Foundation, Endowment Arm, followed by Russell Investment Management, LLC, with an ownership of 3.1%.

On studying our ownership data, we found that 19 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

Researching institutional ownership is a good way to gauge and filter a stock’s expected performance. The same can be achieved by studying analyst sentiments. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of NexGen Energy

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.

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.

Shareholders would probably be interested to learn that insiders own shares in NexGen Energy Ltd.. As individuals, the insiders collectively own CA$6.5m worth of the CA$585m company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, mostly retail investors, hold a substantial 62% stake in NXE, suggesting it is a fairly popular stock. With this size 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 decline an acquisition or merger that may not improve profitability.

Public Company Ownership

Public companies currently own 5.4% of NXE stock. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand NexGen Energy better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We’ve identified 4 warning signs with NexGen Energy (at least 3 which can’t be ignored) , and understanding them should be part of your investment process.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.