NexGen Energy Ltd.'s (TSE:NXE) latest 12% decline adds to one-year losses, institutional investors may consider drastic measures

Key Insights

• Institutions' substantial holdings in NexGen Energy implies that they have significant influence over the company's share price
• The top 25 shareholders own 42% of the company
• Insiders have been buying lately

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A look at the shareholders of NexGen Energy Ltd. (TSE:NXE) can tell us which group is most powerful. With 51% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And so it follows that institutional investors was the group most impacted after the company's market cap fell to CA$3.3b last week after a 12% drop in the share price. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 46% might not go down well especially with this category of shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. Hence, if weakness in NexGen Energy's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

In the chart below, we zoom in on the different ownership groups of NexGen Energy.

View our latest analysis for NexGen Energy

What Does The Institutional Ownership Tell Us About NexGen Energy?

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.

We can see that NexGen Energy does have institutional investors; and they hold a good portion of the company's stock. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of NexGen Energy, (below). Of course, keep in mind that there are other factors to consider, too.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in NexGen Energy. Mirae Asset Global Investments Co., Ltd. is currently the company's largest shareholder with 6.2% of shares outstanding. L1 Capital Pty. Limited is the second largest shareholder owning 4.8% of common stock, and The Vanguard Group, Inc. holds about 3.6% of the company stock. In addition, we found that Leigh Curyer, the CEO has 1.0% of the shares allocated to their name.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of NexGen Energy

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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.

Shareholders would probably be interested to learn that insiders own shares in NexGen Energy Ltd.. 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$67m worth of shares (at current prices). It is good to see this level of investment by insiders. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 41% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Public Company Ownership

Public companies currently own 3.4% of NexGen Energy 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 NexGen Energy better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with NexGen Energy (at least 1 which makes us a bit uncomfortable) , and understanding them should be part of your investment process.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.

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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.