Public companies invested in Formosa Taffeta Co., Ltd. (TWSE:1434) copped the brunt of last week's NT$1.9b market cap decline

Key Insights

• Formosa Taffeta's significant public companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• 50% of the business is held by the top 4 shareholders
• Institutions own 13% of Formosa Taffeta

If you want to know who really controls Formosa Taffeta Co., Ltd. (TWSE:1434), then you'll have to look at the makeup of its share registry. With 37% stake, public companies possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

And last week, public companies endured the biggest losses as the stock fell by 5.7%.

In the chart below, we zoom in on the different ownership groups of Formosa Taffeta.

View our latest analysis for Formosa Taffeta

What Does The Institutional Ownership Tell Us About Formosa Taffeta?

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.

We can see that Formosa Taffeta does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Formosa Taffeta's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Formosa Taffeta. Looking at our data, we can see that the largest shareholder is Formosa Chemicals & Fibre Corporation with 37% of shares outstanding. Chang Gung Medical Foundation is the second largest shareholder owning 5.8% of common stock, and Chang Gung University, Endowment Arm holds about 4.3% of the company stock.

On looking further, we found that 50% of the shares are owned by the top 4 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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Formosa Taffeta

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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.

Shareholders would probably be interested to learn that insiders own shares in Formosa Taffeta Co., Ltd.. It has a market capitalization of just NT$32b, and insiders have NT$1.3b worth of shares, in their own names. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 34% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

It seems that Private Companies own 12%, of the Formosa Taffeta 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.

Public Company Ownership

It appears to us that public companies own 37% of Formosa Taffeta. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For example, we've discovered 2 warning signs for Formosa Taffeta (1 is a bit unpleasant!) that you should be aware of before investing here.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.