Forrestania Resources Limited's (ASX:FRS) market cap rose AU$18m last week; retail investors who hold 57% profited and so did insiders
Key Insights
- The considerable ownership by retail investors in Forrestania Resources indicates that they collectively have a greater say in management and business strategy
- A total of 18 investors have a majority stake in the company with 43% ownership
- Recent sales by insiders
To get a sense of who is truly in control of Forrestania Resources Limited (ASX:FRS), it is important to understand the ownership structure of the business. With 57% stake, retail investors 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.
While retail investors were the group that reaped the most benefits after last week’s 12% price gain, insiders also received a 32% cut.
In the chart below, we zoom in on the different ownership groups of Forrestania Resources.
See our latest analysis for Forrestania Resources
What Does The Lack Of Institutional Ownership Tell Us About Forrestania Resources?
Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it's unusual to see larger companies without any institutional investors.
There could be various reasons why no institutions own shares in a company. Typically, small, newly listed companies don't attract much attention from fund managers, because it would not be possible for large fund managers to build a meaningful position in the company. It is also possible that fund managers don't own the stock because they aren't convinced it will perform well. Forrestania Resources might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.
We note that hedge funds don't have a meaningful investment in Forrestania Resources. The company's largest shareholder is Haltern Pty Ltd, with ownership of 6.1%. The second and third largest shareholders are David Geraghty and Adam Turnbull, with an equal amount of shares to their name at 5.5%. Interestingly, the bottom two of the top three shareholders also hold the title of Top Key Executive and Member of the Board of Directors, respectively, suggesting that these insiders have a personal stake in the company. Furthermore, CEO John Hannaford is the owner of 2.0% of the company's shares.
Our studies suggest that the top 18 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.
While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.
Insider Ownership Of Forrestania Resources
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
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 information suggests that insiders maintain a significant holding in Forrestania Resources Limited. Insiders have a AU$55m stake in this AU$173m business. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.
General Public Ownership
The general public -- including retail investors -- own 57% of Forrestania Resources. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.
Private Company Ownership
It seems that Private Companies own 11%, of the Forrestania Resources stock. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.
Next Steps:
While it is well worth considering the different groups that own a company, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Forrestania Resources (of which 3 can't be ignored!) you should know about.
Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.
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.