A HK$1.2b drop in the market cap of L.K. Technology Holdings Limited (HKG:558) is not what insiders like to see after purchasing shares recently

By
Simply Wall St
Published
May 08, 2022
SEHK:558
Source: Shutterstock

Every investor in L.K. Technology Holdings Limited (HKG:558) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are individual insiders with 62% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And looking at our data, we can see that insiders have bought shares recently. However, with shares price down 8.9% last week, they must be disappointed.

Let's take a closer look to see what the different types of shareholders can tell us about L.K. Technology Holdings.

Check out our latest analysis for L.K. Technology Holdings

ownership-breakdown
SEHK:558 Ownership Breakdown May 8th 2022

What Does The Institutional Ownership Tell Us About L.K. Technology Holdings?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Since institutions own only a small portion of L.K. Technology Holdings, many may not have spent much time considering the stock. But it's clear that some have; and they liked it enough to buy in. If the business gets stronger from here, we could see a situation where more institutions are keen to buy. It is not uncommon to see a big share price rise if multiple institutional investors are trying to buy into a stock at the same time. So check out the historic earnings trajectory, below, but keep in mind it's the future that counts most.

earnings-and-revenue-growth
SEHK:558 Earnings and Revenue Growth May 8th 2022

It looks like hedge funds own 9.6% of L.K. Technology Holdings shares. That's interesting, because hedge funds can be quite active and activist. Many look for medium term catalysts that will drive the share price higher. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In L.K. Technology Holdings' case, its Top Key Executive, Siw Yin Chong, is the largest shareholder, holding 62% of shares outstanding. The Vanguard Group, Inc. is the second largest shareholder owning 0.9% of common stock, and Norges Bank Investment Management holds about 0.3% of the company stock.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of L.K. Technology Holdings

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

It seems that insiders own more than half the L.K. Technology Holdings Limited stock. This gives them a lot of power. That means insiders have a very meaningful HK$7.8b stake in this HK$13b business. Most would argue this is a positive, showing strong alignment with shareholders. You can click here to see if they have been selling down their stake.

General Public Ownership

The general public, who are usually individual investors, hold a 25% stake in L.K. Technology Holdings. 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.

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. Case in point: We've spotted 1 warning sign for L.K. Technology Holdings you should be aware of.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.

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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