Private companies invested in Tung Ho Textile Co., Ltd. (TWSE:1414) copped the brunt of last week's NT$561m market cap decline

Key Insights

• Significant control over Tung Ho Textile by private companies implies that the general public has more power to influence management and governance-related decisions
• The top 5 shareholders own 52% of the company
• Insider ownership in Tung Ho Textile is 16%

A look at the shareholders of Tung Ho Textile Co., Ltd. (TWSE:1414) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are private companies with 47% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As market cap fell to NT$4.8b last week, private companies would have faced the highest losses than any other shareholder groups of the company.

In the chart below, we zoom in on the different ownership groups of Tung Ho Textile.

Check out our latest analysis for Tung Ho Textile

What Does The Lack Of Institutional Ownership Tell Us About Tung Ho Textile?

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 could be various reasons why no institutions own shares in a company. Typically, small, newly listed companies don't attract much attention from fund managers, because it would not be possible for large fund managers to build a meaningful position in the company. It is also possible that fund managers don't own the stock because they aren't convinced it will perform well. Tung Ho Textile might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

We note that hedge funds don't have a meaningful investment in Tung Ho Textile. The company's largest shareholder is Fengtar Fuli Industry Co., Ltd., with ownership of 17%. With 13% and 10% of the shares outstanding respectively, Yushun Investment Development Co., Ltd. and Kao-Huang Lin are the second and third largest shareholders.

On looking further, we found that 52% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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 Tung Ho Textile

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. 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.

Our information suggests that insiders maintain a significant holding in Tung Ho Textile Co., Ltd.. It has a market capitalization of just NT$4.8b, and insiders have NT$792m worth of shares in their own names. 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 36% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Tung Ho Textile. 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.

Private Company Ownership

It seems that Private Companies own 47%, of the Tung Ho Textile stock. 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. Case in point: We've spotted 1 warning sign for Tung Ho Textile you should be aware of.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.