Who Are The Top Investors In Torchlight Energy Resources Inc (NASDAQ:TRCH)?
Today, I will be analyzing Torchlight Energy Resources Inc’s (NASDAQ:TRCH) recent ownership structure, an important but not-so-popular subject among individual investors. A company’s ownership structure is often linked to its share performance in both the long- and short-term. Since the same amount of capital coming from an activist institution and a passive mutual fund has different implications on corporate governance, it is a useful exercise to deconstruct TRCH’s shareholder registry.
View our latest analysis for Torchlight Energy Resources
Institutional Ownership
With an institutional ownership of 11.22%, TRCH can face volatile stock price movements if institutions execute block trades on the open market, more so, when there are relatively small amounts of shares available on the market to trade These moves, at least in the short-term, are generally observed in an institutional ownership mix comprising of active stock pickers, in particular levered hedge funds, which can cause large price swings. For shareholders in TRCH, sharp price movements may not be a major concern as active hedge funds hold a relatively small stake in the company. Although this doesn’t necessarily lead to high short-term volatility, we should dig deeper into TRCH’s ownership structure to find how the remaining owner types can affect its investment profile.
Insider Ownership
Another 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. 26.25% ownership of TRCH insiders is large enough to make an impact on shareholder returns. In general, this level of insider ownership has negatively affected underperforming (consistently low PE ratio) companies and positively affected the companies that outperform (consistently high PE ratio). Another aspect of insider ownership is to learn about their recent transactions. While insider buying is possibly a sign of a positive outlook for the company, selling doesn’t necessarily indicate a negative outlook as they may be selling to meet personal financial needs.
General Public Ownership
A big stake of 56.28% in TRCH is held by the general public. 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
Potential investors in TRCH should also look at another important group of investors: private companies, with a stake of 6.25%, who are primarily invested because of strategic and capital gain interests. This kind of ownership, if predominantly strategic, can give these companies a significant power to affect TRCH’s business strategy. Thus, potential investors should look into these business relations and check how it can impact long-term shareholder returns.
Next Steps:
TRCH’s considerably high level of institutional ownership calls for further analysis into its margin of safety. This will allow investors to reduce the impact of non-fundamental factors, such as volatile block trading impact on their portfolio value. However, ownership structure should not be the only determining factor when you’re building an investment thesis for TRCH. Instead, you should be evaluating company-specific factors such as Torchlight Energy Resources’s past track record and financial health. I urge you to complete your research by taking a look at the following:
1. Financial Health: Is TRCH’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.
2. Past Track Record: Has TRCH 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 TRCH’s historicals for more clarity.
3. 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.
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 pass 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.
