Given the large stake in the stock by institutions, Precision Drilling's stock price might be vulnerable to their trading decisions
The top 25 shareholders own 46% of the company
Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock
To get a sense of who is truly in control of Precision Drilling Corporation (TSE:PD), it is important to understand the ownership structure of the business. With 53% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
And last week, institutional investors ended up benefitting the most after the company hit CA$1.3b in market cap. One-year return to shareholders is currently 29% and last week’s gain was the icing on the cake.
Let's delve deeper into each type of owner of Precision Drilling, beginning with the chart below.
What Does The Institutional Ownership Tell Us About Precision Drilling?
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.
We can see that Precision Drilling does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Precision Drilling, (below). Of course, keep in mind that there are other factors to consider, too.
TSX:PD Earnings and Revenue Growth January 6th 2025
Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in Precision Drilling. Ninepoint Partners LP is currently the company's largest shareholder with 8.2% of shares outstanding. For context, the second largest shareholder holds about 5.2% of the shares outstanding, followed by an ownership of 4.3% by the third-largest shareholder. Additionally, the company's CEO Kevin Neveu directly holds 2.0% of the total shares outstanding.
On studying our ownership data, we found that 25 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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.
Insider Ownership Of Precision Drilling
The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 most recent data indicates that insiders own some shares in Precision Drilling Corporation. In their own names, insiders own CA$43m worth of stock in the CA$1.3b company. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.
General Public Ownership
With a 44% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Precision Drilling. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Next Steps:
It's always worth thinking about the different groups who own shares in a company. But to understand Precision Drilling better, we need to consider many other factors. Take risks for example - Precision Drilling has 3 warning signs (and 1 which shouldn't be ignored) we think you should know about.
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.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
