East West Bancorp, Inc. (NASDAQ:EWBC) is largely controlled by institutional shareholders who own 89% of the company

By
Simply Wall St
Published
November 19, 2021
NasdaqGS:EWBC
Source: Shutterstock

To get a sense of who is truly in control of East West Bancorp, Inc. (NASDAQ:EWBC), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 89% to be precise, is institutions. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Since institutional have access to huge amounts of capital, their market moves tend to receive a lot of scrutiny by retail or individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.

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

See our latest analysis for East West Bancorp

ownership-breakdown
NasdaqGS:EWBC Ownership Breakdown November 20th 2021

What Does The Institutional Ownership Tell Us About East West Bancorp?

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 East West Bancorp does have institutional investors; and they hold a good portion of the company's stock. 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. 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 East West Bancorp, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
NasdaqGS:EWBC Earnings and Revenue Growth November 20th 2021

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Hedge funds don't have many shares in East West Bancorp. Looking at our data, we can see that the largest shareholder is Capital Research and Management Company with 12% of shares outstanding. For context, the second largest shareholder holds about 9.5% of the shares outstanding, followed by an ownership of 8.5% by the third-largest shareholder. Additionally, the company's CEO Dominic Ng directly holds 0.5% of the total shares outstanding.

We did some more digging and found that 9 of the top shareholders account for roughly 50% of the register, implying that along with larger shareholders, there are a few smaller shareholders, thereby balancing out each others interests somewhat.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of East West Bancorp

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 less than 1% of East West Bancorp, Inc.. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$90m of stock. Arguably recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 10% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand East West Bancorp better, we need to consider many other factors.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

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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