Could Petrel Resources Plc’s (LON:PET) Investor Composition Impacts Your Returns?

Every investor in Petrel Resources Plc (LON:PET) should be aware of the most powerful shareholder groups. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones. 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.’

With a market capitalization of UK£2m, Petrel Resources is a small cap stock, so it might not be well known by many institutional investors. Our analysis of the ownership of the company, below, shows that institutions are not on the share registry. We can zoom in on the different ownership groups, to learn more about PET.

Check out our latest analysis for Petrel Resources

AIM:PET Ownership Summary October 10th 18
AIM:PET Ownership Summary October 10th 18

What Does The Lack Of Institutional Ownership Tell Us About Petrel Resources?

Small companies that are not very actively traded often lack institutional investors, but it’s less common to see large companies without them.

There could be various reasons why no institutions own shares in a company. Typically, small, newly listed companies don’t attract much attention from fund managers, because it would not be possible for large fund managers to build a meaningful position in the company. Alternatively, there might be something about the company that has kept institutional investors away. Petrel Resources might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

AIM:PET Income Statement Export October 10th 18
AIM:PET Income Statement Export October 10th 18

We note that hedge funds don’t have a meaningful investment in Petrel Resources. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Petrel Resources

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.

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 Petrel Resources Plc. Insiders own UK£245k worth of shares in the UK£2m company. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public, who are mostly retail investors, collectively hold 74% of Petrel Resources shares. With this size of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to decline an acquisition or merger that may not improve profitability.

Private Company Ownership

It seems that Private Companies own 15%, of the PET stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it’s hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

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.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow for free .

If you would prefer check out another company — one with potentially superior financials — then do not miss this free list of interesting companies, backed by strong financial data.

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.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.