Could The SGOCO Group, Ltd. (NASDAQ:SGOC) Ownership Structure Tell Us Something Useful?

Every investor in SGOCO Group, Ltd. (NASDAQ:SGOC) should be aware of the most powerful shareholder groups. Insiders often own a large chunk of younger, smaller, companies while huge companies tend to have institutions as shareholders. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, ‘Don’t tell me what you think, tell me what you have in your portfolio.

SGOCO Group is a smaller company with a market capitalization of US$72m, so it may still be flying under the radar of many institutional investors. In the chart below, we can see that institutions are not on the share registry. Let’s delve deeper into each type of owner, to discover more about SGOCO Group.

View 5 warning signs we detected for SGOCO Group

NasdaqCM:SGOC Ownership Summary, January 9th 2020
NasdaqCM:SGOC Ownership Summary, January 9th 2020

What Does The Lack Of Institutional Ownership Tell Us About SGOCO Group?

Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it’s unusual to see larger companies without any institutional investors.

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. Alternatively, there might be something about the company that has kept institutional investors away. Institutional investors may not find the historic growth of the business impressive, or there might be other factors at play. You can see the past revenue performance of SGOCO Group, for yourself, below.

NasdaqCM:SGOC Income Statement, January 9th 2020
NasdaqCM:SGOC Income Statement, January 9th 2020

We note that hedge funds don’t have a meaningful investment in SGOCO Group. Looking at our data, we can see that the largest shareholder is Alan Sun with 36% of shares outstanding. With 29% and 5.6% of the shares outstanding respectively, Chi-Yu Leung and Kwok Yee are the second and third largest shareholders.

Additionally, we found that 2 of the top shareholders have a considerable amount of ownership in the company, via their 65% stake.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. Our information suggests that there isn’t any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of SGOCO Group

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.

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.

Our information suggests that insiders own more than half of SGOCO Group, Ltd.. This gives them effective control of the company. So they have a US$56m stake in this US$72m business. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public holds a 13% stake in SGOC. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Company Ownership

We can see that Private Companies own 8.0%, of the shares on issue. It’s hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too.

For example, we’ve discovered 5 warning signs for SGOCO Group (of which 2 are major) which any shareholder or potential investor should be aware of.

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.

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.

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