Hedge funds investors may overlook Perpetua Resources Corp.'s (TSE:PPTA) recent CA$303m market cap drop as long-term gains remain positive

Key Insights

• Significantly high institutional ownership implies Perpetua Resources' stock price is sensitive to their trading actions
• The top 5 shareholders own 51% of the company
• Recent sales by insiders

We've discovered 6 warning signs about Perpetua Resources. View them for free.

If you want to know who really controls Perpetua Resources Corp. (TSE:PPTA), then you'll have to look at the makeup of its share registry. We can see that hedge funds own the lion's share in the company with 40% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

No shareholder likes losing money on their investments, especially hedge funds investors who saw their holdings drop 21% in value last week. Still, the 120% one-year gains may have helped mitigate their overall losses. We would assume however, that they would be on the lookout for weakness in the future.

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

See 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.

Perpetua Resources 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. 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 40% 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. Our data shows that Paulson & Co. Inc. is the largest shareholder with 35% of shares outstanding. With 5.0% and 4.1% of the shares outstanding respectively, Encompass Capital Advisors LLC and Sun Valley Gold LLC are the second and third largest shareholders.

On looking further, we found that 51% 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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Perpetua Resources

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. 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 Perpetua Resources Corp. in their own names. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around CA$15m worth of shares (at current prices). Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 29% stake in Perpetua Resources. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

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. To that end, you should learn about the 6 warning signs we've spotted with Perpetua Resources (including 3 which can't be ignored) .

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.