Key Insights

• The considerable ownership by retail investors in Encounter Resources indicates that they collectively have a greater say in management and business strategy
• 40% of the business is held by the top 17 shareholders
• Insiders own 14% of Encounter Resources

A look at the shareholders of Encounter Resources Limited (ASX:ENR) can tell us which group is most powerful. The group holding the most number of shares in the company, around 60% to be precise, is retail investors. Put another way, the group faces the maximum upside potential (or downside risk).

And individual insiders on the other hand have a 14% ownership in the company. Institutions will often hold stock in bigger companies, and we expect to see insiders owning a noticeable percentage of the smaller ones.

Let's take a closer look to see what the different types of shareholders can tell us about Encounter Resources.

See our latest analysis for Encounter Resources

What Does The Institutional Ownership Tell Us About Encounter 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.

As you can see, institutional investors have a fair amount of stake in Encounter Resources. 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. 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 Encounter Resources' earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Encounter Resources. IGO Limited is currently the largest shareholder, with 6.3% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 6.2% and 6.0%, of the shares outstanding, respectively. William Robinson, who is the second-largest shareholder, also happens to hold the title of Top Key Executive.

Our studies suggest that the top 17 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Encounter 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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

It seems insiders own a significant proportion of Encounter Resources Limited. Insiders have a AU$24m stake in this AU$170m business. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a substantial 60% stake in Encounter Resources, suggesting it is a fairly popular stock. 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 Company Ownership

It seems that Private Companies own 4.6%, of the Encounter Resources stock. 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 12% of Encounter Resources stock. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Encounter Resources (at least 3 which are a bit concerning) , and understanding them should be part of your investment process.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.

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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.