Every investor in TuanChe Limited (NASDAQ:TC) should be aware of the most powerful shareholder groups. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I generally like to see some degree of insider ownership, even if only a little. As Nassim Nicholas Taleb said, ‘Don’t tell me what you think, tell me what you have in your portfolio.
TuanChe is not a large company by global standards. It has a market capitalization of US$122m, which means it wouldn’t have the attention of many institutional investors. Taking a look at our data on the ownership groups (below), it’s seems that institutional investors have bought into the company. We can zoom in on the different ownership groups, to learn more about TuanChe.
What Does The Institutional Ownership Tell Us About TuanChe?
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 TuanChe does have institutional investors; and they hold 7.3% of the stock. 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 TuanChe’s historic earnings and revenue, below, but keep in mind there’s always more to the story.
TuanChe is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is the CEO Wei Wen with 18% of shares outstanding. The second largest shareholder with 12%, is TuanChe Limited., Employee Stock Ownership Plan, followed by Highland Capital Partners, with an ownership of 9.8%.
On studying the facts and figures more closely, we found that the top 5 shareholders control 59% of the company which implies that this group has considerable sway over the company’s decision-making.
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 TuanChe
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.
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.
It seems insiders own a significant proportion of TuanChe Limited. Insiders have a US$33m stake in this US$122m business. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.
General Public Ownership
The general public holds a 14% stake in TC. While this group can’t necessarily call the shots, it can certainly have a real influence on how the company is run.
Private Equity Ownership
Private equity firms hold a 20% stake in TC. This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and — as the name suggests — don’t invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.
Private Company Ownership
It seems that Private Companies own 20%, of the TC stock. 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.
It’s always worth thinking about the different groups who own shares in a company. But to understand TuanChe better, we need to consider many other factors. For instance, we’ve identified 2 warning signs for TuanChe (1 shouldn’t be ignored) that you should be aware of.
Ultimately the future is most important. You can access this free report on analyst forecasts for the company.
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.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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