The large groups of shareholders of Vulcan Energy Resources Limited (ASX:VUL) have power over the company. Insiders often own a large portion of younger, smaller companies, while larger companies tend to have institutions as shareholders. I like to see at least a little insider ownership. As Charlie Munger said “Show me the incentive and I’ll show you the result”.
With a market capitalization of A$974 million, Vulcan Energy Resources is a small-cap stock, so it may not be well known to many institutional investors. Our analysis of company ownership, below, shows that institutional investors have bought the company. We can zoom in on the different ownership groups, to learn more about Vulcan Energy Resources.
Check out our latest analysis for Vulcan Energy Resources
What does institutional ownership tell us about Vulcan’s energy resources?
Institutional investors typically compare their own returns to the returns of a commonly tracked index. They therefore generally consider buying larger companies that are included in the relevant benchmark.
Vulcan Energy Resources already has institutions on the share register. Indeed, they hold a respectable stake in the company. This suggests some credibility with professional investors. But we cannot rely solely on this fact since institutions sometimes make bad investments, like everyone else. If multiple institutions change their minds on a stock at the same time, you could see the stock price drop quickly. It is therefore worth taking a look at the earnings history of Vulcan Energy Resources below. Of course, the future is what really matters.
Vulcan Energy Resources is not owned by hedge funds. With a 13% stake, CEO Francis Edward Wedin is the largest shareholder. Meanwhile, the second and third largest shareholders hold 6.0% and 5.8% of the outstanding shares respectively. Interestingly, the third shareholder, Gavin Rezos, is also chairman of the board, indicating strong insider ownership among the company’s major shareholders.
Looking at our ownership data, we found that 25 of the major shareholders collectively own less than 50% of the share register, implying that no single individual holds a majority stake.
Institutional ownership research is a good way to assess and filter the expected performance of a stock. The same can be obtained by studying the feelings of the analyst. A number of analysts cover the stock, so you can look at growth forecasts quite easily.
Insider ownership of Vulcan Energy Resources
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The management of the company runs the company, but the CEO will answer to the board of directors, even if he is a member of it.
Insider ownership is positive when it signals that executives think like the true owners of the company. However, strong insider ownership can also give immense power to a small group within the company. This can be negative in certain circumstances.
It appears that insiders own a significant share of Vulcan Energy Resources Limited. Insiders hold an A$229 million stake in the A$974 million business. This may suggest that the founders still own a lot of shares. You can click here to see if they bought or sold.
General public property
The general public, who are usually retail investors, hold a substantial 57% stake in Vulcan Energy Resources, suggesting it is quite a popular stock. With this amount 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 vote on acquisitions or mergers that may not improve profitability.
Private Company Ownership
We can see that private companies hold 11% of the issued shares. It’s hard to draw conclusions from this fact alone, so it’s worth investigating who owns these private companies. Sometimes insiders or other related parties have an interest in shares of a public company through a separate private company.
While it is worth considering the different groups that own a business, there are other, even more important factors. Take for example the ubiquitous specter of investment risk. We have identified 4 warning signs with Vulcan Energy Resources, and understanding them should be part of your investment process.
If you’re like me, you might want to ask yourself if this business will grow or shrink. Luckily, you can check out this free report showing analyst predictions for its future.
NB: The figures in this article are calculated using trailing twelve month data, which refers to the 12 month period ending on the last day of the month in which the financial statements are dated. This may not be consistent with the annual report figures for the full year.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.