Private companies in FLEX LNG Ltd. (OB:FLNG) are its biggest bettors, and their bets paid off as stock gained 11% last week

By
Simply Wall St
Published
January 12, 2022
OB:FLNG
Source: Shutterstock

To get a sense of who is truly in control of FLEX LNG Ltd. (OB:FLNG), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 46% to be precise, is private companies. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, private companies collectively scored the highest last week as the company hit kr11b market cap following a 11% gain in the stock.

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

View our latest analysis for FLEX LNG

ownership-breakdown
OB:FLNG Ownership Breakdown January 12th 2022

What Does The Institutional Ownership Tell Us About FLEX LNG?

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.

As you can see, institutional investors have a fair amount of stake in FLEX LNG. 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. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see FLEX LNG's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
OB:FLNG Earnings and Revenue Growth January 12th 2022

We note that hedge funds don't have a meaningful investment in FLEX LNG. Our data shows that Greenwich Holdings Ltd. is the largest shareholder with 46% of shares outstanding. For context, the second largest shareholder holds about 5.2% of the shares outstanding, followed by an ownership of 4.4% by the third-largest shareholder.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 52% stake.

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 FLEX LNG

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 data suggests that insiders own under 1% of FLEX LNG Ltd. in their own names. But they may have an indirect interest through a corporate structure that we haven't picked up on. Keep in mind that it's a big company, and the insiders own kr41m worth of shares. The absolute value might be more important than the proportional share. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 28% ownership, the general public, mostly comprising of individual investors, have some degree of sway over FLEX LNG. 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.

Private Company Ownership

It seems that Private Companies own 46%, of the FLEX LNG 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. For instance, we've identified 3 warning signs for FLEX LNG (2 make us uncomfortable) that you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.