Could The RAK Petroleum plc (OB:RAKP) Ownership Structure Tell Us Something Useful?

The big shareholder groups in RAK Petroleum plc (OB:RAKP) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, ‘Don’t tell me what you think, tell me what you have in your portfolio.

RAK Petroleum is not a large company by global standards. It has a market capitalization of kr3.3b, which means it wouldn’t have the attention of many institutional investors. In the chart below below, we can see that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about RAKP.

View our latest analysis for RAK Petroleum

OB:RAKP Ownership Summary, November 4th 2019
OB:RAKP Ownership Summary, November 4th 2019

What Does The Institutional Ownership Tell Us About RAK Petroleum?

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 RAK Petroleum does have institutional investors; and they hold 14% of the 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. 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 RAK Petroleum, (below). Of course, keep in mind that there are other factors to consider, too.

OB:RAKP Income Statement, November 4th 2019
OB:RAKP Income Statement, November 4th 2019

We note that hedge funds don’t have a meaningful investment in RAK Petroleum. Our information suggests that there isn’t any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of RAK Petroleum

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.

Our information suggests that insiders maintain a significant holding in RAK Petroleum plc. It has a market capitalization of just kr3.3b, and insiders have kr849m 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 retail investors — own 50% of RAK Petroleum. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Private Company Ownership

Our data indicates that Private Companies hold 10%, of the company’s shares. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it’s hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

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

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free.

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.

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.

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. Thank you for reading.