Formosa Oilseed Processing Co., Ltd.'s (TWSE:1225) stock price dropped 12% last week; private companies would not be happy

Key Insights

• Formosa Oilseed Processing's significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• The top 4 shareholders own 54% of the company
• Insider ownership in Formosa Oilseed Processing is 31%

Every investor in Formosa Oilseed Processing Co., Ltd. (TWSE:1225) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are private companies with 35% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Following a 12% decrease in the stock price last week, private companies suffered the most losses, but insiders who own 31% stock also took a hit.

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

See our latest analysis for Formosa Oilseed Processing

What Does The Lack Of Institutional Ownership Tell Us About Formosa Oilseed Processing?

Small companies that are not very actively traded often lack institutional investors, but it's less common to see large companies without them.

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. Alternatively, there might be something about the company that has kept institutional investors away. Formosa Oilseed Processing might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

Hedge funds don't have many shares in Formosa Oilseed Processing. Looking at our data, we can see that the largest shareholder is Shin Tai Industry Co., Ltd. with 20% of shares outstanding. The second and third largest shareholders are Zhong Ming Xu and Yao-Tong Guan, with an equal amount of shares to their name at 12%.

Our research also brought to light the fact that roughly 54% of the company is controlled by the top 4 shareholders suggesting that these owners wield significant influence on the business.

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. 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 Formosa Oilseed Processing

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

It seems insiders own a significant proportion of Formosa Oilseed Processing Co., Ltd.. It has a market capitalization of just NT$21b, and insiders have NT$6.6b worth of shares in their own names. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 12% stake in Formosa Oilseed Processing. 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

Our data indicates that Private Companies hold 35%, of the company's shares. 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

Public companies currently own 22% of Formosa Oilseed Processing stock. 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 instance, we've identified 2 warning signs for Formosa Oilseed Processing that 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.