institutional investors of TechStar Acquisition Corporation (HKG:7855) must be disappointed after last week's 11% drop

Key Insights

• Given the large stake in the stock by institutions, TechStar Acquisition's stock price might be vulnerable to their trading decisions
• The top 4 shareholders own 52% of the company
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

A look at the shareholders of TechStar Acquisition Corporation (HKG:7855) can tell us which group is most powerful. The group holding the most number of shares in the company, around 38% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

And following last week's 11% decline in share price, institutional suffered the most losses.

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

Check out our latest analysis for TechStar Acquisition

What Does The Institutional Ownership Tell Us About TechStar Acquisition?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

TechStar Acquisition already has institutions on the share registry. Indeed, they own a respectable stake in the company. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of TechStar Acquisition, (below). Of course, keep in mind that there are other factors to consider, too.

Our data indicates that hedge funds own 7.1% of TechStar Acquisition. That worth noting, since hedge funds are often quite active investors, who may try to influence management. Many want to see value creation (and a higher share price) in the short term or medium term. Looking at our data, we can see that the largest shareholder is Fortune Opportunity Fund with 25% of shares outstanding. ABCI Investment Management Limited is the second largest shareholder owning 12% of common stock, and Fountainhead Partners L.P. holds about 7.5% of the company stock.

To make our study more interesting, we found that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of TechStar Acquisition

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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.

We note our data does not show any board members holding shares, personally. It is unusual not to have at least some personal holdings by board members, so our data might be flawed. A good next step would be to take a look at this free summary of insider buying and selling.

General Public Ownership

With a 32% ownership, the general public, mostly comprising of individual investors, have some degree of sway over TechStar Acquisition. 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 Equity Ownership

With a stake of 12%, private equity firms could influence the TechStar Acquisition board. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

Our data indicates that Private Companies hold 10%, of the company's shares. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for TechStar Acquisition (of which 2 can't be ignored!) you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.