In this article, I’m going to take a look at FieldPoint Petroleum Corporation’s (AMEX:FPP) latest ownership structure, a non-fundamental factor which is important, but remains a less discussed subject among investors. A company’s ownership structure is often linked to its share performance in both the long- and short-term. The effect of an active institutional investor with a similar ownership as a passive pension-fund can be vastly different on a company’s corporate governance and accountability to shareholders. While this may be more interesting for long-term investors, short-term investors can also benefit by paying attention to when these institutions trade in order to take advantage of the heightened volatility. Now I will analyze FPP’s shareholder registry in more detail.
Institutional investors typically buy and sell shares in large magnitudes which can significantly sway the share price, especially when there are relatively small amounts of shares available on the market to trade. With an institutional ownership of 7.68%, FPP doesn’t seem too exposed to higher volatility resulting from institutional trading. Stocks with low coverage such as FPP, attracts renowned investor Peter Lynch, who has benefited from the momentum of institutions buying into a stock as it gained popularity.
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. FPP insiders hold a significant stake of 21.67% in the company. This level of insider ownership has been found to have a negative impact on companies with consistently low PE ratios (underperformers), while it has been positive in the case of high PE ratio firms (outperformers). Another aspect of insider ownership is to learn about their recent transactions. Insiders buying company shares can be a positive indicator of future performance, but a selling decision can simply be driven by personal financial needs.
General Public Ownership
A substantial ownership of 46.55% in FPP is held by the general public. This size of ownership gives retail investors collective power in deciding on major policy decisions such as executive compensation, appointment of directors and acquisitions of businesses. Such level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and potential acquisitions. This is a positive sign for an investor who wants to be involved in key decision-making of the company.
Private Company Ownership
Potential investors in FPP should also look at another important group of investors: private companies, with a stake of 24.11%, who are primarily invested because of strategic and capital gain interests. With this size of ownership in FPP, this ownership class can affect the company’s business strategy. As a result, potential investors should further explore the company’s business relations with these companies and find out if they can affect shareholder returns in the long-term.
What this means for you:
Are you a shareholder? Institutional ownership in FPP is not at a level that would concern investors. We are less likely to see sustained downtrends or significant volatility resulting from large institutional trading. If you’re looking to diversify your holdings with high-quality stocks, our free analysis platform has a selection of high-quality stocks with a strong growth potential.
Are you a potential investor? If you are building an investment case for FPP, ownership structure alone should not dictate your decision to buy or sell the stock. Instead, you should be evaluating fundamental factors like the relative valuation of FPP, which is an important driver that determines FPP’s share price. Take a look at our most recent infographic report on FPP for a more in-depth analysis of these factors to help you make a more well-informed investment decision.