Given the large stake in the stock by institutions, Perpetua Resources’ stock price might be vulnerable to their trading decisions
The top 3 shareholders own 54% of the company
To get a sense of who is truly in control of Perpetua Resources Corp. (TSE:PPTA), 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 hedge funds. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
Since hedge funds have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.
In the chart below, we zoom in on the different ownership groups of Perpetua Resources.
What Does The Institutional Ownership Tell Us About Perpetua Resources?
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 Perpetua Resources does have institutional investors; and they hold a good portion of the company’s stock. This suggests some credibility amongst professional investors. But we can’t rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Perpetua Resources’ historic earnings and revenue below, but keep in mind there’s always more to the story.
It would appear that 46% of Perpetua Resources shares are controlled by hedge funds. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Our data shows that Paulson & Co. Inc. is the largest shareholder with 39% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 8.2% and 7.4%, of the shares outstanding, respectively.
A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 54% stake.
Researching institutional ownership is a good way to gauge and filter a stock’s expected performance. The same can be achieved by studying analyst sentiments. There is some analyst coverage of the stock, but it could still become more well known, with time.
Insider Ownership Of Perpetua Resources
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.
Our data suggests that insiders own under 1% of Perpetua Resources Corp. in their own names. It has a market capitalization of just CA$250m, and the board has only CA$996k worth of shares in their own names. Many tend to prefer to see a board with bigger shareholdings. A good next step might be to take a look at this free summary of insider buying and selling.
General Public Ownership
With a 29% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Perpetua Resources. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.
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. Like risks, for instance. Every company has them, and we’ve spotted 3 warning signs for Perpetua Resources (of which 2 are a bit concerning!) you should know about.
But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.
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.
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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.