Could The PrairieSky Royalty Ltd. (TSE:PSK) Ownership Structure Tell Us Something Useful?

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A look at the shareholders of PrairieSky Royalty Ltd. (TSE:PSK) can tell us which group is most powerful. Institutions often own shares in more established companies, while it’s not unusual to see insiders own a fair bit of smaller companies. Companies that have been privatized tend to have low insider ownership.

PrairieSky Royalty has a market capitalization of CA$4.3b, so it’s too big to fly under the radar. We’d expect to see both institutions and retail investors owning a portion of the company. In the chart below below, we can see that institutions are noticeable on the share registry. Let’s take a closer look to see what the different types of shareholder can tell us about PSK.

See our latest analysis for PrairieSky Royalty

TSX:PSK Ownership Summary, July 4th 2019
TSX:PSK Ownership Summary, July 4th 2019

What Does The Institutional Ownership Tell Us About PrairieSky Royalty?

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 PrairieSky Royalty does have institutional investors; and they hold 62% 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 PrairieSky Royalty, (below). Of course, keep in mind that there are other factors to consider, too.

TSX:PSK Income Statement, July 4th 2019
TSX:PSK Income Statement, July 4th 2019

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don’t have a meaningful investment in PrairieSky Royalty. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of PrairieSky Royalty

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board; and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board, themselves.

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.

Shareholders would probably be interested to learn that insiders own shares in PrairieSky Royalty Ltd.. This is a big company, so it is good to see this level of alignment. Insiders own CA$45m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

With a 37% ownership, the general public have some degree of sway over PSK. 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.

Next Steps:

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

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.