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Should You Be Concerned About Bonterra Energy Corp’s (TSE:BNE) Investors?

Luis Baughman

I am going to take a deep dive into Bonterra Energy Corp’s (TSE:BNE) most recent ownership structure, not a frequent subject of discussion among individual investors.

Ownership structure of a company has been found to affect share performance over time.

Since 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 of shareholders, investors should take a closer look at BNE’s shareholder registry.

Check out our latest analysis for Bonterra Energy



TSX:BNE Ownership Summary August 7th 18

Institutional Ownership

In BNE’s case, institutional ownership stands at 23.94%, significant enough to cause considerable price moves in the case of large institutional transactions, especially when there is a low level of public shares available on the market to trade.

However, as not all institutions are alike, such high volatility events, especially in the short-term, have been more frequently linked to active market participants like hedge funds.

For shareholders in BNE, sharp price movements may not be a major concern as active hedge funds hold a relatively small stake in the company. But we can dig deeper into BNE’s ownership structure to find how the remaining owner types can affect its investment profile.

Insider Ownership

An important group of shareholders are company insiders. Insider ownership has to do more with how the company is managed and less to do with the direct impact of the magnitude of shares trading on the market.

BNE insiders hold a significant stake of 19.91% 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).

It may be interesting to take a look at what company insiders have been doing with their holdings lately.

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

The general public holds a substantial 56.08% stake in BNE, making it a highly popular stock among retail investors.

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 BNE should consider are private companies, with a stake of 0.063%. While they invest more often due to strategic interests, an investment can also be driven by capital gains through share price appreciation.

However, an ownership of this size may be relatively insignificant, meaning that these shareholders may not have the potential to influence BNE’s business strategy. Thus, investors not need worry too much about the consequences of these holdings.

Next Steps:

The company’s high institutional ownership makes margin of safety a very important consideration to existing investors since long bull and bear trends often emerge when these big-ticket investors see a change in long-term potential of the company.

This will enable shareholders to comfortably invest in the company while avoid getting trapped in a sustained sell-off that is often observed in stocks with this level of institutional participation.

However,

if you are building an investment case for BNE, ownership structure alone should not dictate your decision to buy or sell the stock.

Rather, you should be examining fundamental factors

such as

the intrinsic valuation, which is a key driver of Bonterra Energy’s share price.

I

urge

you to complete your research by taking a look at the following:

  • Financial Health: Are BNE’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.
  • Past Track Record: Has BNE 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 BNE’s historicals for more clarity.
  • 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.

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    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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.