Could The E Lighting Group Holdings Limited (HKG:8222) Ownership Structure Tell Us Something Useful?

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The big shareholder groups in E Lighting Group Holdings Limited (HKG:8222) have power over the company. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. 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.’

With a market capitalization of HK$41m, E Lighting Group Holdings is a small cap stock, so it might not be well known by 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. We can zoom in on the different ownership groups, to learn more about 8222.

See our latest analysis for E Lighting Group Holdings

SEHK:8222 Ownership Summary, June 7th 2019
SEHK:8222 Ownership Summary, June 7th 2019

What Does The Lack Of Institutional Ownership Tell Us About E Lighting Group Holdings?

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. E Lighting Group Holdings might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

SEHK:8222 Income Statement, June 7th 2019
SEHK:8222 Income Statement, June 7th 2019

Hedge funds don’t have many shares in E Lighting Group Holdings. 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 E Lighting Group Holdings

The definition of company insiders can be subjective, and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. 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.

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 E Lighting Group Holdings Limited. This gives them effective control of the company. That means they own HK$23m worth of shares in the HK$41m company. That’s quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

With a 43% ownership, the general public have some degree of sway over 8222. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Next Steps:

It’s always worth thinking about the different groups who own shares in a company. But to understand E Lighting Group Holdings better, we need to consider many other factors.

I always like to check for a history of revenue growth. You can too, by accessing this free chart of historic revenue and earnings in this detailed graph.

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.