Hedge funds investors may overlook Perpetua Resources Corp.'s (TSE:PPTA) recent CA$83m market cap drop as long-term gains remain positive

Key Insights

• Institutions' substantial holdings in Perpetua Resources implies that they have significant influence over the company's share price
• 50% of the business is held by the top 5 shareholders
• Using data from analyst forecasts alongside ownership research, one can better assess the future performance of a company

To get a sense of who is truly in control of Perpetua Resources Corp. (TSE:PPTA), it is important to understand the ownership structure of the business. We can see that hedge funds own the lion's share in the company with 35% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Losing money on investments is something no shareholder enjoys, least of all hedge funds investors who saw their holdings value drop by 6.8% last week. Still, the 313% one-year gains may have helped mitigate their overall losses. They should, however, be mindful of further losses in the future.

Let's take a closer look to see what the different types of shareholders can tell us about Perpetua Resources.

View our latest analysis for Perpetua Resources

What Does The Institutional Ownership Tell Us About Perpetua Resources?

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.

As you can see, institutional investors have a fair amount of stake in Perpetua Resources. 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. 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 Perpetua Resources, (below). Of course, keep in mind that there are other factors to consider, too.

It looks like hedge funds own 35% of Perpetua Resources shares. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Paulson & Co. Inc. is currently the company's largest shareholder with 35% of shares outstanding. For context, the second largest shareholder holds about 4.2% of the shares outstanding, followed by an ownership of 4.0% by the third-largest shareholder.

On looking further, we found that 50% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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. 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 Perpetua Resources

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 most recent data indicates that insiders own less than 1% of Perpetua Resources Corp.. It has a market capitalization of just CA$1.2b, and the board has only CA$4.6m worth of shares in their own names. We generally like to see a board more invested. However it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 34% stake in Perpetua Resources. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

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 Perpetua Resources is showing 3 warning signs in our investment analysis , and 2 of those are a bit concerning...

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.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.