Who Are The Major Shareholders Of Drake Resources Limited (ASX:DRK)?

Jenifer Prater

Updated Sun, Jan 21, 2018, 6:17 PM

In this article, I’m going to take a look at Drake Resources Limited’s (ASX:DRK) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. When it comes to ownership structure of a company, the impact has been observed in both the long-and short-term performance of shares. Differences in ownership structure of companies can have a profound effect on how management’s incentives are aligned with shareholder returns, which is why we’ll take a moment to analyse DRK’s shareholder registry. All data provided is as of the most recent financial year end.

See our latest analysis for Drake Resources

Institutional Ownership

Institutional investors are one of the largest group of market participants and their buy-sell decisions on a company’s stock can significantly impact prices, more so, when there are relatively small amounts of shares available on the market to trade. A low institutional ownership of 1.94% puts DRK on a list of companies that are not likely exposed to spikes in volatility resulting from institutional trading. Less covered stocks like DRK used to feature in legendary investor Peter Lynch’s portfolio, which would later be bought up by fast-following institutions as the stock gained more popularity.

Insider Ownership

I find insiders are another important group of stakeholders, who are directly involved in making key decisions related to the use of capital. In essence, insider ownership is more about the alignment of shareholders’ interests with the management. A major group of owners of DRK is individual insiders, sitting with a hefty 22.88% stake in the company. Broadly, insider ownership of this level has been found to negatively affect companies with consistently low PE ratio (underperforming). And a positive impact has been seen on companies with a high PE ratio (outperforming). It may be interesting to take a look at what company insiders have been doing with their holdings lately. Insider buying may be a sign of upbeat future expectations, however, selling doesn’t necessarily mean the opposite as insiders may be motivated by their personal financial needs.

General Public Ownership

A substantial ownership of 59.72% in DRK is held by the general public. With this size of ownership, retail investors can collectively play a role in major company policies that affect shareholders returns, including executive remuneration 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

Another group of owners that a potential investor in DRK should consider are private companies, with a stake of 15.46%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation. An ownership of this size indicates a strong financial backing and has the potential to influence DRK’s business strategy. Thus, investors should dig deeper into DRK’s business relations with these companies and how it can affect shareholder returns in the long-term.

What this means for you:

Institutional ownership level and composition in DRK is not high nor active enough to significantly impact its investment thesis. However, ownership structure should not be the only determining factor when you’re building an investment thesis for DRK. Instead, you should be evaluating company-specific factors such as the intrinsic valuation, which is a key driver of Drake Resources’s share price. I highly recommend you to complete your research by taking a look at the following:

1. Financial Health: Is DRK’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
2. Past Track Record: Has DRK been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of DRK’s historicals for more clarity.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

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 pass 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.