Individual investors invested in Challenger Exploration Limited (ASX:CEL) up 21% last week, insiders too were rewarded

Key Insights

• The considerable ownership by individual investors in Challenger Exploration indicates that they collectively have a greater say in management and business strategy
• The top 20 shareholders own 49% of the company
• Insider ownership in Challenger Exploration is 21%

If you want to know who really controls Challenger Exploration Limited (ASX:CEL), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are individual investors with 51% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Individual investors gained the most after market cap touched AU$152m last week, while insiders who own 21% also benefitted.

Let's delve deeper into each type of owner of Challenger Exploration, beginning with the chart below.

Check out our latest analysis for Challenger Exploration

What Does The Institutional Ownership Tell Us About Challenger Exploration?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that Challenger Exploration does have institutional investors; and they hold a good portion of the company's stock. 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Challenger Exploration's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Challenger Exploration. The company's largest shareholder is BlackRock, Inc., with ownership of 13%. With 8.5% and 5.0% of the shares outstanding respectively, Sergio Rotondo and Kris Knauer are the second and third largest shareholders. Note that the second and third-largest shareholders are also Senior Key Executive and Member of the Board of Directors, respectively, meaning that the company's top shareholders are insiders.

Our studies suggest that the top 20 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Challenger Exploration

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.

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 most recent data indicates that insiders own a reasonable proportion of Challenger Exploration Limited. Insiders have a AU$32m stake in this AU$152m business. 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, who are usually individual investors, hold a substantial 51% stake in Challenger Exploration, suggesting it is a fairly popular stock. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Private Company Ownership

We can see that Private Companies own 14%, of the shares on issue. 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 Challenger Exploration better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Challenger Exploration (of which 2 are concerning!) you should know about.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.