Hotai Finance Co., Ltd.'s (TWSE:6592) last week's 4.7% decline must have disappointed private companies who have a significant stake

Key Insights

• The considerable ownership by private companies in Hotai Finance indicates that they collectively have a greater say in management and business strategy
• The top 2 shareholders own 58% of the company
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

Every investor in Hotai Finance Co., Ltd. (TWSE:6592) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 41% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

As market cap fell to NT$74b last week, private companies would have faced the highest losses than any other shareholder groups of the company.

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

View our latest analysis for Hotai Finance

What Does The Institutional Ownership Tell Us About Hotai Finance?

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.

As you can see, institutional investors have a fair amount of stake in Hotai Finance. 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 Hotai Finance's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Hotai Finance. Looking at our data, we can see that the largest shareholder is Hezhan Automobile Co., Ltd. with 39% of shares outstanding. With 20% and 3.2% of the shares outstanding respectively, Toyota Motor Corporation and Fubon Life Insurance Co., Ltd., Asset Management Arm are the second and third largest shareholders.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 58% stake.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Hotai Finance

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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.

Our data suggests that insiders own under 1% of Hotai Finance Co., Ltd. in their own names. However, it's possible that insiders might have an indirect interest through a more complex structure. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own NT$19m worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

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 41%, of the Hotai Finance 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 20% of Hotai Finance. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

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. Take risks for example - Hotai Finance has 3 warning signs (and 1 which can't be ignored) we think 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