Transcend Information, Inc.'s (TWSE:2451) market cap surged NT$3.1b last week, private companies who have a lot riding on the company were rewarded

Key Insights

• The considerable ownership by private companies in Transcend Information 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 57% ownership
• 18% of Transcend Information is held by Institutions

To get a sense of who is truly in control of Transcend Information, Inc. (TWSE:2451), 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 56% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Clearly, private companies benefitted the most after the company's market cap rose by NT$3.1b last week.

In the chart below, we zoom in on the different ownership groups of Transcend Information.

View our latest analysis for Transcend Information

What Does The Institutional Ownership Tell Us About Transcend Information?

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 Transcend Information. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Transcend Information, (below). Of course, keep in mind that there are other factors to consider, too.

Transcend Information is not owned by hedge funds. Wanqing Investment Co., Ltd. is currently the largest shareholder, with 17% of shares outstanding. Capital Investment Trust Corporation is the second largest shareholder owning 10% of common stock, and Wan'an Technology Co., Ltd. holds about 8.0% of the company stock. Additionally, the company's CEO Chung-Won Shu directly holds 0.6% of the total shares outstanding.

We also observed that the top 6 shareholders account for more than half of the share register, with a few smaller shareholders to balance the interests of the larger ones to a certain extent.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Transcend Information

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.

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.

We can see that insiders own shares in Transcend Information, Inc.. The insiders have a meaningful stake worth NT$974m. Most would see this as a real positive. Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 23% stake in Transcend Information. 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.

Private Company Ownership

Our data indicates that Private Companies hold 56%, of the company's shares. 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 2 warning signs for Transcend Information you should be aware of, and 1 of them is potentially serious.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this 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.