Do Insiders Own Lots Of Shares In Merdeka Financial Group Limited (HKG:8163)?

The big shareholder groups in Merdeka Financial Group Limited (HKG:8163) have power over the company. Generally speaking, as a company grows, institutions will increase their ownership. Conversely, insiders often decrease their ownership over time. I quite like to see at least a little bit of insider ownership. As Charlie Munger said ‘Show me the incentive and I will show you the outcome.

Merdeka Financial Group is a smaller company with a market capitalization of HK$24m, so it may still be flying under the radar of many institutional investors. Taking a look at our data on the ownership groups (below), it’s seems that institutions are not on the share registry. Let’s take a closer look to see what the different types of shareholder can tell us about 8163.

See our latest analysis for Merdeka Financial Group

SEHK:8163 Ownership Summary, December 20th 2019
SEHK:8163 Ownership Summary, December 20th 2019

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

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 could be various reasons why no institutions own shares in a company. Typically, small, newly listed companies don’t attract much attention from fund managers, because it would not be possible for large fund managers to build a meaningful position in the company. Alternatively, there might be something about the company that has kept institutional investors away. Merdeka Financial Group’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.

SEHK:8163 Income Statement, December 20th 2019
SEHK:8163 Income Statement, December 20th 2019

Hedge funds don’t have many shares in Merdeka Financial Group. 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 Merdeka Financial Group

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

It seems insiders own a significant proportion of Merdeka Financial Group Limited. Insiders own HK$4.4m worth of shares in the HK$24m company. There’s no doubt that we learn useful information from looking at a company’s ownership structure and shareholders. However, there are many other factors to consider, such as the risks within the company itself. For example, we’ve discovered 4 warning signs for Merdeka Financial Group (of which 1 is major) which any shareholder or potential investor should be aware of.

General Public Ownership

The general public, who are mostly retail investors, collectively hold 75% of Merdeka Financial Group shares. This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

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.

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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