Could The OreCorp Limited (ASX:ORR) Ownership Structure Tell Us Something Useful?

By
Simply Wall St
Published
April 06, 2021
ASX:ORR

The big shareholder groups in OreCorp Limited (ASX:ORR) have power over the company. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

OreCorp is a smaller company with a market capitalization of AU$168m, so it may still be flying under the radar of many institutional investors. Taking a look at our data on the ownership groups (below), it seems that institutions own shares in the company. Let's take a closer look to see what the different types of shareholders can tell us about OreCorp.

View our latest analysis for OreCorp

ownership-breakdown
ASX:ORR Ownership Breakdown April 7th 2021

What Does The Institutional Ownership Tell Us About OreCorp?

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.

OreCorp already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. 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 OreCorp's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
ASX:ORR Earnings and Revenue Growth April 7th 2021

Hedge funds don't have many shares in OreCorp. Our data shows that Federation Mining Pty Ltd is the largest shareholder with 13% of shares outstanding. For context, the second largest shareholder holds about 11% of the shares outstanding, followed by an ownership of 9.3% by the third-largest shareholder. In addition, we found that Matthew Yates, the CEO has 3.3% of the shares allocated to their name.

On further inspection, we found that more than half the company's shares are owned by the top 8 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. As far I can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of OreCorp

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Shareholders would probably be interested to learn that insiders own shares in OreCorp Limited. As individuals, the insiders collectively own AU$16m worth of the AU$168m company. This shows at least some alignment, but I usually like to see larger insider holdings. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public holds a 39% stake in OreCorp. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Company Ownership

We can see that Private Companies own 30%, of the shares on issue. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that OreCorp is showing 2 warning signs in our investment analysis , you should know about...

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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. 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.
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