Eclat Textile Co., Ltd.'s (TWSE:1476) market cap decline of NT$6.9b may not have as much of an impact on institutional owners after a year of 3.7% returns

Key Insights

• Significantly high institutional ownership implies Eclat Textile's stock price is sensitive to their trading actions
• 52% of the business is held by the top 11 shareholders
• Insiders own 25% of Eclat Textile

To get a sense of who is truly in control of Eclat Textile Co., Ltd. (TWSE:1476), it is important to understand the ownership structure of the business. With 29% stake, institutions possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors endured the highest losses after the company's market cap fell by NT$6.9b last week. However, the 3.7% one-year return to shareholders might have softened the blow. We would assume however, that they would be on the lookout for weakness in the future.

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

Check out our latest analysis for Eclat Textile

What Does The Institutional Ownership Tell Us About Eclat Textile?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Eclat Textile 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. 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 Eclat Textile's historic earnings and revenue below, but keep in mind there's always more to the story.

Eclat Textile is not owned by hedge funds. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In Eclat Textile's case, its Senior Key Executive, Li-Chen Wang, is the largest shareholder, holding 10% of shares outstanding. Yiyuan Investment Co., Ltd. is the second largest shareholder owning 9.4% of common stock, and Cheng-Hai Hung holds about 6.8% of the company stock. Interestingly, the third-largest shareholder, Cheng-Hai Hung is also a Chairman of the Board, again, indicating strong insider ownership amongst the company's top shareholders.

After doing some more digging, we found that the top 11 have the combined ownership of 52% in the company, suggesting that no single shareholder has significant control over 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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Eclat 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.

It seems insiders own a significant proportion of Eclat Textile Co., Ltd.. It has a market capitalization of just NT$141b, and insiders have NT$36b worth of shares in their own names. That's quite significant. 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 29% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Eclat Textile. 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 17%, 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Eclat Textile you should know about.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

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