Could The New Gold Inc. (TSE:NGD) Ownership Structure Tell Us Something Useful?

By
Simply Wall St
Published
June 06, 2021
TSX:NGD

Every investor in New Gold Inc. (TSE:NGD) should be aware of the most powerful shareholder groups. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.

New Gold isn't enormous, but it's not particularly small either. It has a market capitalization of CA$1.7b, which means it would generally expect to see some institutions on the share registry. Taking a look at our data on the ownership groups (below), it seems that institutional investors have bought into the company. Let's delve deeper into each type of owner, to discover more about New Gold.

View our latest analysis for New Gold

ownership-breakdown
TSX:NGD Ownership Breakdown June 7th 2021

What Does The Institutional Ownership Tell Us About New Gold?

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.

New Gold already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at New Gold's earnings history below. Of course, the future is what really matters.

earnings-and-revenue-growth
TSX:NGD Earnings and Revenue Growth June 7th 2021

We note that hedge funds don't have a meaningful investment in New Gold. Van Eck Associates Corporation is currently the company's largest shareholder with 10% of shares outstanding. In comparison, the second and third largest shareholders hold about 7.6% and 2.9% of the stock.

Our studies suggest that the top 25 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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of New Gold

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.

I can report that insiders do own shares in New Gold Inc.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around CA$137m worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public holds a 46% stake in New Gold. 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:

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. Be aware that New Gold is showing 1 warning sign in our investment analysis , you should know about...

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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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