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Could The Liberty Gold Corp. (TSE:LGD) Ownership Structure Tell Us Something Useful?

·4 min read

The big shareholder groups in Liberty Gold Corp. (TSE:LGD) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said 'Show me the incentive and I will show you the outcome.

Liberty Gold is a smaller company with a market capitalization of CA$376m, so it may still be flying under the radar of many institutional investors. In the chart below, we can see that institutions are noticeable on the share registry. Let's delve deeper into each type of owner, to discover more about Liberty Gold.

View our latest analysis for Liberty Gold

ownership-breakdown
ownership-breakdown

What Does The Institutional Ownership Tell Us About Liberty Gold?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Liberty Gold already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Liberty Gold's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
earnings-and-revenue-growth

Hedge funds don't have many shares in Liberty Gold. Van Eck Associates Corporation is currently the company's largest shareholder with 11% of shares outstanding. For context, the second largest shareholder holds about 5.9% of the shares outstanding, followed by an ownership of 5.7% by the third-largest shareholder. Additionally, the company's CEO Calvin Everett directly holds 2.9% of the total shares outstanding.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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 a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Liberty Gold

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

I generally consider insider ownership to be a good thing. However, on some occasions it makes it more difficult for other shareholders to hold the board accountable for decisions.

I can report that insiders do own shares in Liberty Gold Corp.. In their own names, insiders own CA$28m worth of stock in the CA$376m company. This shows at least some alignment. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public collectively holds 53% of Liberty Gold shares. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Private Equity Ownership

With a stake of 5.9%, private equity firms could influence the Liberty Gold board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Next Steps:

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 Liberty Gold (of which 1 shouldn't be ignored!) you should know about.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.

This article by Simply Wall St is general in nature. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.