Hsin Kuang Steel Company Limited's (TWSE:2031) market cap surged NT$1.8b last week, retail investors who have a lot riding on the company were rewarded

Key Insights

• The considerable ownership by retail investors in Hsin Kuang Steel indicates that they collectively have a greater say in management and business strategy
• A total of 25 investors have a majority stake in the company with 43% ownership
• Insider ownership in Hsin Kuang Steel is 11%

A look at the shareholders of Hsin Kuang Steel Company Limited (TWSE:2031) can tell us which group is most powerful. With 57% stake, retail investors possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, retail investors collectively scored the highest last week as the company hit NT$21b market cap following a 9.3% gain in the stock.

In the chart below, we zoom in on the different ownership groups of Hsin Kuang Steel.

Check out our latest analysis for Hsin Kuang Steel

What Does The Institutional Ownership Tell Us About Hsin Kuang Steel?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

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

Hsin Kuang Steel is not owned by hedge funds. Hande Investment Co., Ltd. is currently the largest shareholder, with 8.5% of shares outstanding. For context, the second largest shareholder holds about 5.4% of the shares outstanding, followed by an ownership of 4.6% by the third-largest shareholder. Ming-Te Su, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

Our studies suggest that the top 25 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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 is some analyst coverage of the stock, but it could still become more well known, with time.

Insider Ownership Of Hsin Kuang Steel

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

Our information suggests that insiders maintain a significant holding in Hsin Kuang Steel Company Limited. Insiders have a NT$2.2b stake in this NT$21b business. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a substantial 57% stake in Hsin Kuang Steel, suggesting it is a fairly popular stock. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Private Company Ownership

We can see that Private Companies own 22%, 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Hsin Kuang Steel better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Hsin Kuang Steel you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.