Do Insiders Own Shares In Byron Energy Limited (ASX:BYE)?

By
Simply Wall St
Published
March 04, 2020
ASX:BYE

Every investor in Byron Energy Limited (ASX:BYE) should be aware of the most powerful shareholder groups. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.

Byron Energy is not a large company by global standards. It has a market capitalization of AU$227m, which means it wouldn't have the attention of many institutional investors. In the chart below, we can see that institutional investors have not yet purchased shares. Let's take a closer look to see what the different types of shareholder can tell us about Byron Energy.

View our latest analysis for Byron Energy

ASX:BYE Ownership Summary, March 4th 2020
ASX:BYE Ownership Summary, March 4th 2020

What Does The Lack Of Institutional Ownership Tell Us About Byron Energy?

We don't tend to see institutional investors holding stock of companies that are very risky, thinly traded, or very small. Though we do sometimes see large companies without institutions on the register, it's not particularly common.

There could be various reasons why no institutions own shares in a company. Typically, small, newly listed companies don't attract much attention from fund managers, because it would not be possible for large fund managers to build a meaningful position in 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. Institutional investors may not find the historic growth of the business impressive, or there might be other factors at play. You can see the past revenue performance of Byron Energy, for yourself, below.

ASX:BYE Income Statement, March 4th 2020
ASX:BYE Income Statement, March 4th 2020

Hedge funds don't have many shares in Byron Energy. Metgasco Limited is currently the company's largest shareholder with 5.2% of shares outstanding. The second and third largest shareholders are Veruse Pty. Ltd. and Maynard Smith, holding 4.7% and 4.5%, respectively. Maynard Smith also happens to hold the title of Member of the Board of Directors.

On studying our ownership data, we found that 20 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. 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 Byron Energy

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 Byron Energy Limited. Insiders own AU$41m worth of shares in the AU$227m company. I would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public -- mostly retail investors -- own 60% of Byron Energy. 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

It seems that Private Companies own 15%, of the BYE stock. 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.

Public Company Ownership

Public companies currently own 7.5% of BYE 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 1 warning sign for Byron Energy you should be aware of.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

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.

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