Darfon Electronics Corp.'s (TWSE:8163) last week's 11% decline must have disappointed retail investors who have a significant stake

Key Insights

• The considerable ownership by retail investors in Darfon Electronics indicates that they collectively have a greater say in management and business strategy
• 50% of the business is held by the top 23 shareholders
• 17% of Darfon Electronics is held by Institutions

A look at the shareholders of Darfon Electronics Corp. (TWSE:8163) can tell us which group is most powerful. The group holding the most number of shares in the company, around 49% to be precise, is retail investors. Put another way, the group faces the maximum upside potential (or downside risk).

And last week, retail investors endured the biggest losses as the stock fell by 11%.

In the chart below, we zoom in on the different ownership groups of Darfon Electronics.

See our latest analysis for Darfon Electronics

What Does The Institutional Ownership Tell Us About Darfon Electronics?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

Darfon Electronics already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Darfon Electronics, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Darfon Electronics. Qisda Corporation is currently the company's largest shareholder with 26% of shares outstanding. In comparison, the second and third largest shareholders hold about 3.9% and 3.1% of the stock. Additionally, the company's CEO Kai-Chien Su directly holds 1.8% of the total shares outstanding.

After doing some more digging, we found that the top 23 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. There is a little analyst coverage of the stock, but not much. So there is room for it to gain more coverage.

Insider Ownership Of Darfon Electronics

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.

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.

We can report that insiders do own shares in Darfon Electronics Corp.. It has a market capitalization of just NT$14b, and insiders have NT$506m worth of shares, in their own names. Some would say this shows alignment of interests between shareholders and the board. But it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 49% stake in the company, and hence can't easily be ignored. 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.

Public Company Ownership

It appears to us that public companies own 26% of Darfon Electronics. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 2 warning signs for Darfon Electronics that you should be aware of.

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.

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