Do Insiders Own Lots Of Shares In Wah Fu Education Group Limited (NASDAQ:WAFU)?

If you want to know who really controls Wah Fu Education Group Limited (NASDAQ:WAFU), then you’ll have to look at the makeup of its share registry. 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.

Wah Fu Education Group is not a large company by global standards. It has a market capitalization of US$6.6m, which means it wouldn’t have the attention of many institutional investors. Our analysis of the ownership of the company, below, shows 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 WAFU.

View our latest analysis for Wah Fu Education Group

NasdaqCM:WAFU Ownership Summary, November 14th 2019
NasdaqCM:WAFU Ownership Summary, November 14th 2019

What Does The Lack Of Institutional Ownership Tell Us About Wah Fu Education 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 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. Wah Fu Education 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.

NasdaqCM:WAFU Income Statement, November 14th 2019
NasdaqCM:WAFU Income Statement, November 14th 2019

Hedge funds don’t have many shares in Wah Fu Education Group. As far I can tell there isn’t analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Wah Fu Education 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.

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 own more than half of Wah Fu Education Group Limited. This gives them effective control of the company. Given it has a market cap of US$6.6m, that means they have US$4.3m worth of shares. Most would be pleased to see the board is investing alongside them. You may wish todiscover (for free) if they have been buying or selling.

General Public Ownership

The general public, with a 27% stake in the company, will not easily be ignored. 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

It seems that Private Companies own 7.3%, of the WAFU stock. 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:

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.

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.

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.