retail investors who own 59% along with institutions invested in Huaku Development Co., Ltd. (TWSE:2548) saw increase in their holdings value last week

Key Insights

• Huaku Development's significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 25 investors have a majority stake in the company with 40% ownership
• Institutions own 22% of Huaku Development

To get a sense of who is truly in control of Huaku Development Co., Ltd. (TWSE:2548), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are retail investors with 59% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While retail investors were the group that benefitted the most from last week’s NT$4.0b market cap gain, institutions too had a 22% share in those profits.

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

View our latest analysis for Huaku Development

What Does The Institutional Ownership Tell Us About Huaku Development?

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 Huaku Development. 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. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Huaku Development's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Huaku Development. Looking at our data, we can see that the largest shareholder is Zhongshan Investment Co., Ltd. with 7.1% of shares outstanding. Newland Developers Group is the second largest shareholder owning 5.3% of common stock, and Taiwan Life Insurance Co. Ltd., Asset Management Arm holds about 4.7% of the company stock. Additionally, the company's CEO Rong Chang Zhong directly holds 1.1% of the total shares outstanding.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. 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 Huaku Development

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. 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.

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.

We can see that insiders own shares in Huaku Development Co., Ltd.. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around NT$1.8b worth of shares (at current prices). If you would like to explore the question of insider alignment, you can click here to see if insiders have been buying or selling.

General Public Ownership

The general public -- including retail investors -- own 59% of Huaku Development. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Private Company Ownership

We can see that Private Companies own 14%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Huaku Development better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Huaku Development (at least 1 which can't be ignored) , and understanding them should be part of your investment process.

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.