Could The Lianluo Smart Limited (NASDAQ:LLIT) Ownership Structure Tell Us Something Useful?

Every investor in Lianluo Smart Limited (NASDAQ:LLIT) should be aware of the most powerful shareholder groups. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. Warren Buffett said that he likes ‘a business with enduring competitive advantages that is run by able and owner-oriented people’. So it’s nice to see some insider ownership, because it may suggest that management is owner-oriented.

Lianluo Smart is a smaller company with a market capitalization of US$8.2m, so it may still be flying under the radar of many institutional investors. In the chart below below, we can see that institutions are not really that prevalent on the share registry. Let’s take a closer look to see what the different types of shareholder can tell us about LLIT.

See our latest analysis for Lianluo Smart

NasdaqCM:LLIT Ownership Summary, November 11th 2019
NasdaqCM:LLIT Ownership Summary, November 11th 2019

What Does The Lack Of Institutional Ownership Tell Us About Lianluo Smart?

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 multiple explanations for why institutions don’t own a stock. The most common is that the company is too small relative to fund under management, so the institition does not bother to look closely at the company. 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. Lianluo Smart’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.

NasdaqCM:LLIT Income Statement, November 11th 2019
NasdaqCM:LLIT Income Statement, November 11th 2019

Lianluo Smart is not owned by hedge funds. 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 Lianluo Smart

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

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our information suggests that insiders maintain a significant holding in Lianluo Smart Limited. Insiders own US$1.7m worth of shares in the US$8.2m company. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

With a 16% ownership, the general public have some degree of sway over LLIT. 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

We can see that public companies hold 62%, of the LLIT shares on issue. We can’t be certain, but this is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand Lianluo Smart better, we need to consider many other factors.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.