Institutional investors in Radiant Opto-Electronics Corporation (TWSE:6176) see NT$4.0b decrease in market cap last week, although long-term gains have benefitted them.

Key Insights

• Institutions' substantial holdings in Radiant Opto-Electronics implies that they have significant influence over the company's share price
• The top 22 shareholders own 51% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

If you want to know who really controls Radiant Opto-Electronics Corporation (TWSE:6176), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are institutions with 54% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors was the group most impacted after the company's market cap fell to NT$87b last week. However, the 56% one-year return to shareholders might have softened the blow. But they would probably be wary of future losses.

In the chart below, we zoom in on the different ownership groups of Radiant Opto-Electronics.

See our latest analysis for Radiant Opto-Electronics

What Does The Institutional Ownership Tell Us About Radiant Opto-Electronics?

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.

We can see that Radiant Opto-Electronics does have institutional investors; and they hold a good portion of the company's stock. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Radiant Opto-Electronics' historic earnings and revenue below, but keep in mind there's always more to the story.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. We note that hedge funds don't have a meaningful investment in Radiant Opto-Electronics. The company's largest shareholder is Capital Investment Trust Corporation, with ownership of 6.8%. Yuanta Securities Investment Trust Co., Ltd. is the second largest shareholder owning 4.7% of common stock, and Fuh Hwa Securities Investment Trust Co., Ltd. holds about 4.0% of the company stock.

After doing some more digging, we found that the top 22 have the combined ownership of 51% in the company, suggesting that no single shareholder has significant control over the company.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Radiant Opto-Electronics

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.

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.

Our most recent data indicates that insiders own some shares in Radiant Opto-Electronics Corporation. 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$1.9b 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 41% stake in the company, and hence can't easily be ignored. 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Radiant Opto-Electronics better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Radiant Opto-Electronics (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

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.