Could The Fjordland Exploration Inc. (CVE:FEX) Ownership Structure Tell Us Something Useful?

Simply Wall St

Mon, Sep 23, 2019, 11:01 AM

The big shareholder groups in Fjordland Exploration Inc. (CVE:FEX) have power over the company. 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.

Fjordland Exploration is not a large company by global standards. It has a market capitalization of CA$2.9m, which means it wouldn't have the attention of many institutional investors. In the chart below below, we can see that institutional investors have not yet purchased shares. We can zoom in on the different ownership groups, to learn more about FEX.

View our latest analysis for Fjordland Exploration

TSXV:FEX Ownership Summary, September 23rd 2019

What Does The Lack Of Institutional Ownership Tell Us About Fjordland 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. Alternatively, there might be something about the company that has kept institutional investors away. Fjordland 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:FEX Income Statement, September 23rd 2019

We note that hedge funds don't have a meaningful investment in Fjordland Exploration. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Fjordland Exploration

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. The company management answer to the board; and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board, themselves.

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 a reasonable proportion of Fjordland Exploration Inc.. It has a market capitalization of just CA$2.9m, and insiders have CA$492k worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public, who are mostly retail investors, collectively hold 54% of Fjordland Exploration 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

Our data indicates that Private Companies hold 29%, of the company's shares. 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.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this 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.

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.

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. Thank you for reading.

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