How Much Of PetroShale Inc. (CVE:PSH) Do Insiders Own?

By
Simply Wall St
Published
July 25, 2021
TSXV:PSH
Source: Shutterstock

A look at the shareholders of PetroShale Inc. (CVE:PSH) 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. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, 'Don’t tell me what you think, tell me what you have in your portfolio.

With a market capitalization of CA$146m, PetroShale is a small cap stock, so it might not be well known by many institutional investors. In the chart below, we can see that institutions don't own shares in the company. Let's delve deeper into each type of owner, to discover more about PetroShale.

Check out our latest analysis for PetroShale

ownership-breakdown
TSXV:PSH Ownership Breakdown July 25th 2021

What Does The Lack Of Institutional Ownership Tell Us About PetroShale?

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 are many reasons why a company might not have any institutions on the share registry. It may be hard for institutions to buy large amounts of shares, if liquidity (the amount of shares traded each day) is low. If the company has not needed to raise capital, institutions might lack the opportunity to build a position. Alternatively, there might be something about the company that has kept institutional investors away. PetroShale might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

earnings-and-revenue-growth
TSXV:PSH Earnings and Revenue Growth July 25th 2021

PetroShale is not owned by hedge funds. First Reserve Corporation is currently the company's largest shareholder with 45% of shares outstanding. For context, the second largest shareholder holds about 23% of the shares outstanding, followed by an ownership of 1.9% by the third-largest shareholder. M. Chernoff, who is the second-largest shareholder, also happens to hold the title of Top Key Executive.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 68% stake.

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

Insider Ownership Of PetroShale

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. 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.

Our information suggests that insiders maintain a significant holding in PetroShale Inc.. Insiders own CA$36m worth of shares in the CA$146m 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 holds a 27% stake in PetroShale. 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 Equity Ownership

Private equity firms hold a 45% stake in PetroShale. 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Take risks for example - PetroShale has 3 warning signs (and 2 which are potentially serious) we think you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this 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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