King's Town Construction Co., Ltd.'s (TWSE:2524) stock price dropped 11% last week; private companies would not be happy

Key Insights

• King's Town Construction's significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 3 investors have a majority stake in the company with 59% ownership
• Insider ownership in King's Town Construction is 39%

A look at the shareholders of King's Town Construction Co., Ltd. (TWSE:2524) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are private companies with 48% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While the holdings of private companies took a hit after last week’s 11% price drop, insiders with their 39% also suffered.

In the chart below, we zoom in on the different ownership groups of King's Town Construction.

Check out our latest analysis for King's Town Construction

What Does The Lack Of Institutional Ownership Tell Us About King's Town Construction?

We don't tend to see institutional investors holding stock of companies that are very risky, thinly traded, or very small. Though we do sometimes see large companies without institutions on the register, it's not particularly common.

There are many reasons why a company might not have any institutions on the share registry. It may be hard for institutions to buy large amounts of shares, if liquidity (the amount of shares traded each day) is low. If the company has not needed to raise capital, institutions might lack the opportunity to build a position. On the other hand, it's always possible that professional investors are avoiding a company because they don't think it's the best place for their money. King's Town Construction's earnings and revenue track record (below) may not be compelling to institutional investors -- or they simply might not have looked at the business closely.

Hedge funds don't have many shares in King's Town Construction. Looking at our data, we can see that the largest shareholder is the CEO Tien-Tsan Tsai with 29% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 17% and 13%, of the shares outstanding, respectively.

To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of King's Town Construction

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. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 most recent data indicates that insiders own a reasonable proportion of King's Town Construction Co., Ltd.. Insiders have a NT$6.5b stake in this NT$17b 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

With a 13% ownership, the general public, mostly comprising of individual investors, have some degree of sway over King's Town Construction. 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

We can see that Private Companies own 48%, of the shares on issue. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Take risks for example - King's Town Construction has 3 warning signs (and 2 which shouldn't be ignored) we think you should know about.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.