Lian Hwa Foods Corporation's (TWSE:1231) market cap surged NT$1.9b last week, private companies who have a lot riding on the company were rewarded

Key Insights

• The considerable ownership by private companies in Lian Hwa Foods indicates that they collectively have a greater say in management and business strategy
• A total of 6 investors have a majority stake in the company with 53% ownership
• Insider ownership in Lian Hwa Foods is 23%

To get a sense of who is truly in control of Lian Hwa Foods Corporation (TWSE:1231), it is important to understand the ownership structure of the business. We can see that private companies own the lion's share in the company with 39% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Clearly, private companies benefitted the most after the company's market cap rose by NT$1.9b last week.

In the chart below, we zoom in on the different ownership groups of Lian Hwa Foods.

View our latest analysis for Lian Hwa Foods

What Does The Lack Of Institutional Ownership Tell Us About Lian Hwa Foods?

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 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. It is also possible that fund managers don't own the stock because they aren't convinced it will perform well. Institutional investors may not find the historic growth of the business impressive, or there might be other factors at play. You can see the past revenue performance of Lian Hwa Foods, for yourself, below.

Lian Hwa Foods is not owned by hedge funds. Xinde Investment Co., Ltd. is currently the company's largest shareholder with 13% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 12% and 7.9%, of the shares outstanding, respectively.

We did some more digging and found that 6 of the top shareholders account for roughly 53% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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. 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 Lian Hwa Foods

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.

Our information suggests that insiders maintain a significant holding in Lian Hwa Foods Corporation. It has a market capitalization of just NT$34b, and insiders have NT$7.8b worth of shares in their own names. That's quite significant. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. 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 37% stake in Lian Hwa Foods. 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

Our data indicates that Private Companies hold 39%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Lian Hwa Foods , and understanding them should be part of your investment process.

Of course this may not be the best stock to buy. So take a peek at this free free list of interesting companies.

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.