With 49% ownership in Chroma ATE Inc. (TWSE:2360), institutional investors have a lot riding on the business

Key Insights

• Institutions' substantial holdings in Chroma ATE implies that they have significant influence over the company's share price
• A total of 21 investors have a majority stake in the company with 50% ownership
• 14% of Chroma ATE is held by insiders

Every investor in Chroma ATE Inc. (TWSE:2360) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 49% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

And things are looking up for institutional investors after the company gained NT$9.7b in market cap last week. The gains from last week would have further boosted the one-year return to shareholders which currently stand at 30%.

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

See our latest analysis for Chroma ATE

What Does The Institutional Ownership Tell Us About Chroma ATE?

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 Chroma ATE. 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 Chroma ATE's historic earnings and revenue below, but keep in mind there's always more to the story.

We note that hedge funds don't have a meaningful investment in Chroma ATE. Looking at our data, we can see that the largest shareholder is the CEO Ching-Ming Huang with 7.1% of shares outstanding. With 6.2% and 4.7% of the shares outstanding respectively, Chun Chen and GIC Private Limited are the second and third largest shareholders.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 21 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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 are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Chroma ATE

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 a reasonable proportion of Chroma ATE Inc.. It has a market capitalization of just NT$143b, and insiders have NT$21b worth of shares in their own names. That's quite significant. Most would be pleased to see the board is investing alongside them. You may wish to access this free chart showing recent trading by insiders.

General Public Ownership

With a 36% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Chroma ATE. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Chroma ATE is showing 1 warning sign in our investment analysis , you should know about...

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com