Do Insiders Own Lots Of Shares In Abacus Mining & Exploration Corporation (CVE:AME)?

By
Simply Wall St
Published
March 04, 2020
TSXV:AME

Every investor in Abacus Mining & Exploration Corporation (CVE:AME) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. Warren Buffett said that he likes "a business with enduring competitive advantages that is run by able and owner-oriented people." So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.

Abacus Mining & Exploration is not a large company by global standards. It has a market capitalization of CA$6.9m, which means it wouldn't have the attention of many institutional investors. Our analysis of the ownership of the company, below, shows that institutions don't own shares in the company. Let's take a closer look to see what the different types of shareholder can tell us about Abacus Mining & Exploration.

See our latest analysis for Abacus Mining & Exploration

TSXV:AME Ownership Summary, March 4th 2020
TSXV:AME Ownership Summary, March 4th 2020

What Does The Lack Of Institutional Ownership Tell Us About Abacus Mining & Exploration?

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. On the other hand, it's always possible that professional investors are avoiding a company because they don't think it's the best place for their money. Abacus Mining & Exploration's earnings and revenue track record (below) may not be compelling to institutional investors -- or they simply might not have looked at the business closely.

TSXV:AME Income Statement, March 4th 2020
TSXV:AME Income Statement, March 4th 2020

We note that hedge funds don't have a meaningful investment in Abacus Mining & Exploration. Our data shows that Teck Resources Limited is the largest shareholder with 8.2% of shares outstanding. Paul Anderson is the second largest shareholder with 2.9% of common stock, followed by Michael McInnis, holding 1.9% of the stock. Note that they are also President and Chairman of the Board, respectively, meaning that the company's top shareholders are insiders.

On studying our ownership data, we found that 6 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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

Insider Ownership Of Abacus Mining & Exploration

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Shareholders would probably be interested to learn that insiders own shares in Abacus Mining & Exploration Corporation. As individuals, the insiders collectively own CA$460k worth of the CA$6.9m company. It is good to see some investment by insiders, but I usually like to see higher insider holdings. It might be worth checking if those insiders have been buying.

General Public Ownership

The general public -- mostly retail investors -- own 85% of Abacus Mining & Exploration. This size of ownership gives retail investors collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Public Company Ownership

It appears to us that public companies own 8.2% of AME. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 6 warning signs with Abacus Mining & Exploration (at least 3 which make us uncomfortable) , and understanding them should be part of your investment process.

Of course this may not be the best stock to buy. So take a peek at this free 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.

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.

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. Thank you for reading.

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