Private companies are Royale Home Holdings Limited's (HKG:1198) biggest owners and were hit after market cap dropped HK$130m

Key Insights

• The considerable ownership by private companies in Royale Home Holdings indicates that they collectively have a greater say in management and business strategy
• The top 2 shareholders own 75% of the company
• 27% of Royale Home Holdings is held by insiders

A look at the shareholders of Royale Home Holdings Limited (HKG:1198) can tell us which group is most powerful. We can see that private companies own the lion's share in the company with 48% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While the holdings of private companies took a hit after last week’s 10.0% price drop, insiders with their 27% also suffered.

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

View our latest analysis for Royale Home Holdings

What Does The Lack Of Institutional Ownership Tell Us About Royale Home Holdings?

Small companies that are not very actively traded often lack institutional investors, but it's less common to see large companies without them.

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. It is also possible that fund managers don't own the stock because they aren't convinced it will perform well. Royale Home Holdings might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

Hedge funds don't have many shares in Royale Home Holdings. Looking at our data, we can see that the largest shareholder is Guangzhou Hi-Tech Industry Development Zone Administration Committee with 48% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 27% and 0.1%, of the shares outstanding, respectively. Interestingly, the bottom two of the top three shareholders also hold the title of Top Key Executive and Member of the Board of Directors, respectively, suggesting that these insiders have a personal stake in the company.

To make our study more interesting, we found that the top 2 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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. 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 Royale Home Holdings

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.

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.

Our most recent data indicates that insiders own a reasonable proportion of Royale Home Holdings Limited. Insiders own HK$321m worth of shares in the HK$1.2b company. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

With a 25% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Royale Home 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.

Private Company Ownership

We can see that Private Companies own 48%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

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 2 warning signs for Royale Home Holdings you should be aware of.

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.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com