Could Frontera Energy Corporation’s (TSE:FEC) Investor Composition Influence The Stock Price?

A look at the shareholders of Frontera Energy Corporation (TSE:FEC) can tell us which group is most powerful. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. We also tend to see lower insider ownership in companies that were previously publicly owned.

With a market capitalization of CA$1.3b, Frontera Energy is a decent size, so it is probably on the radar of institutional investors. Our analysis of the ownership of the company, below, shows that institutions are noticeable on the share registry. Let’s delve deeper into each type of owner, to discover more about FEC.

View our latest analysis for Frontera Energy

TSX:FEC Ownership Summary, February 28th 2019
TSX:FEC Ownership Summary, February 28th 2019

What Does The Institutional Ownership Tell Us About Frontera Energy?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

We can see that Frontera Energy does have institutional investors; and they hold 12% of the stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Frontera Energy, (below). Of course, keep in mind that there are other factors to consider, too.

TSX:FEC Income Statement, February 28th 2019
TSX:FEC Income Statement, February 28th 2019

Frontera Energy is not owned by hedge funds. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Frontera Energy

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 data suggests that insiders own under 1% of Frontera Energy Corporation in their own names. It seems the board members have no more than CA$123k worth of shares in the CA$1.3b company. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public — mostly retail investors — own 55% of Frontera Energy . With this size of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.

Private Equity Ownership

Private equity firms hold a 33% stake in FEC. This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and — as the name suggests — don’t invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand Frontera Energy 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 .

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.