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The Lundin Gold Inc (TSE:LUG) Ownership Structure Could Be Important

Every investor in Lundin Gold Inc (TSE:LUG) should be aware of the most powerful shareholder groups. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. We also tend to see lower insider ownership in companies that were previously publicly owned.

Lundin Gold is a smaller company with a market capitalization of CA$1.03b, so it may still be flying under the radar of many institutional investors. Taking a look at the our data on the ownership groups (below), it’s seems that institutional investors have bought into the company. Let’s take a closer look to see what the different types of shareholder can tell us about LUG.

Check out our latest analysis for Lundin Gold

TSX:LUG Ownership Summary September 26th 18

What Does The Institutional Ownership Tell Us About Lundin Gold?

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.

Lundin Gold already has institutions on the share registry. Indeed, they own 25.7% of 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 Lundin Gold’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

TSX:LUG Income Statement Export September 26th 18

We note that hedge funds don’t have a meaningful investment in Lundin Gold. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Lundin Gold

The definition of company insiders can be subjective, and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

Our information suggests that Lundin Gold Inc insiders own under 1% of the company. However, it’s possible that insiders might have an indirect interest through a more complex structure. It seems the board members have no more than CA$4.4m worth of shares in the CA$1.03b company. I generally like to see a board more invested. However it might be worth checking if those insiders have been buying.

General Public Ownership

The general public holds a 20.7% stake in LUG. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Equity Ownership

Private equity firms hold a 5.0% stake in LUG. This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and — as the name suggests — don’t invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Private Company Ownership

Our data indicates that Private Companies hold 11.4%, of the company’s shares. 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.

Public Company Ownership

Public companies currently own 36.8% of LUG stock. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand Lundin Gold better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.