NovaGold Resources Inc.'s (TSE:NG) latest 3.2% decline adds to one-year losses, institutional investors may consider drastic measures
Key Insights
Institutions' substantial holdings in NovaGold Resources implies that they have significant influence over the company's share price
The top 5 shareholders own 51% of the company
If you want to know who really controls NovaGold Resources Inc. (TSE:NG), then you'll have to look at the makeup of its share registry. We can see that institutions own the lion's share in the company with 53% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.
And so it follows that institutional investors was the group most impacted after the company's market cap fell to CA$2.2b last week after a 3.2% drop in the share price. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 5.0% for shareholders. Often called “market makers”, institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in NovaGold Resources' share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.
Let's take a closer look to see what the different types of shareholders can tell us about NovaGold Resources.
Check out our latest analysis for NovaGold Resources
What Does The Institutional Ownership Tell Us About NovaGold Resources?
Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.
NovaGold Resources already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at NovaGold Resources' earnings history below. Of course, the future is what really matters.
Institutional investors own over 50% of the company, so together than can probably strongly influence board decisions. It would appear that 6.7% of NovaGold Resources shares are controlled by hedge funds. That catches my attention because hedge funds sometimes try to influence management, or bring about changes that will create near term value for shareholders. Looking at our data, we can see that the largest shareholder is Electrum Strategic Holdings, L.L.C. with 25% of shares outstanding. FMR LLC is the second largest shareholder owning 7.2% of common stock, and Paulson & Co. Inc. holds about 6.7% of the company stock. In addition, we found that Gregory Lang, the CEO has 0.6% of the shares allocated to their name.
Our research also brought to light the fact that roughly 51% of the company is controlled by the top 5 shareholders suggesting that these owners wield significant influence on the business.
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 some analyst coverage of the stock, but it could still become more well known, with time.
Insider Ownership Of NovaGold Resources
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. 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.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our most recent data indicates that insiders own some shares in NovaGold Resources Inc.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around CA$29m worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.
General Public Ownership
With a 14% ownership, the general public, mostly comprising of individual investors, have some degree of sway over NovaGold Resources. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Company Ownership
Our data indicates that Private Companies hold 25%, 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.
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. Take risks for example - NovaGold Resources has 4 warning signs (and 2 which are a bit unpleasant) we think you should know about.
If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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