I am going to take a deep dive into Bellatrix Exploration Ltd’s (TSX:BXE) most recent ownership structure, not a frequent subject of discussion among individual investors. The impact of a company’s ownership structure affects both its short- and long-term performance. If an activist institution invests the same amount of capital in a stock as a passive long-term pension fund, the implications are potentially different for key corporate financing decisions such as the use of excess cash or the source of financing. While these are more of a long-term investor’s concern, short-term investors may find the impact of institutional trading overwhelming enough to lose out on what could be a potential opportunity. Therefore, it is beneficial for us to examine BXE’s ownership structure in more detail.View our latest analysis for Bellatrix Exploration
Institutional OwnershipBXE’s 22.46% institutional ownership seems enough to cause large share price movements in the case of significant share sell-off or acquisitions by institutions, particularly when there is a low level of public shares available on the market to trade. These moves, at least in the short-term, are generally observed in an institutional ownership mix comprising of active stock pickers, in particular levered hedge funds, which can cause large price swings. With hedge funds holding a 20.86% stake in the company, its share price can experience heightened volatility. I am going to further examine BXE’s ownership structure to check how other major shareholders can affect its investment case.
Insider OwnershipAnother important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market. BXE insiders hold a not-so-significant 2.34% stake in the company, which somewhat aligns their interests with that of shareholders. However, a higher level of insider ownership has been linked to management executing on high-returning projects instead of expansion projects for the sake of apparent growth. It would also be interesting to check what insiders have been doing with their shareholding recently. Insider buying can be a positive indicator of future performance, but a selling decision can be simply driven by personal financial requirements.
General Public OwnershipA big stake of 54.34% in BXE is held by the general public. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.
What this means for you:
Are you a shareholder? I suggest investors seek some degree of margin of safety due to high institutional ownership in BXE, in particular due to the strong presence of active hedge fund investors. This is to avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation. If you’re interested in bolstering your portfolio with new stocks and are looking for ideas, take a look at our free app to see my list of stocks with a strong growth potential.
Are you a potential investor? Ownership structure should not be the only focus of your research when constructing an investment thesis around BXE. Rather, you should be looking at fundamental drivers like the future growth expectations around BXE, which is a key factor that will influence BXE’s share value. Take a look at our most recent infographic report on BXE for a more in-depth analysis of these factors to help you make a more well-informed investment decision.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.