Newegg Commerce, Inc.'s (NASDAQ:NEGG) market cap up US$52m last week, benefiting both private companies who own 58% as well as insiders

Key Insights

• Significant control over Newegg Commerce by private companies implies that the general public has more power to influence management and governance-related decisions
• Hangzhou Lianluo Interactive Information Technology Co.,Ltd owns 58% of the company
• Insiders own 32% of Newegg Commerce

To get a sense of who is truly in control of Newegg Commerce, Inc. (NASDAQ:NEGG), 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 58% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While private companies were the group that reaped the most benefits after last week’s 18% price gain, insiders also received a 32% cut.

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

Check out our latest analysis for Newegg Commerce

What Does The Lack Of Institutional Ownership Tell Us About Newegg Commerce?

Institutional investors often avoid companies that are too small, too illiquid or too risky for their tastes. But it's unusual to see larger companies without any institutional investors.

There are many reasons why a company might not have any institutions on the share registry. It may be hard for institutions to buy large amounts of shares, if liquidity (the amount of shares traded each day) is low. If the company has not needed to raise capital, institutions might lack the opportunity to build a position. It is also possible that fund managers don't own the stock because they aren't convinced it will perform well. Newegg Commerce might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

Hedge funds don't have many shares in Newegg Commerce. Hangzhou Lianluo Interactive Information Technology Co.,Ltd is currently the largest shareholder, with 58% of shares outstanding. This implies that they have majority interest control of the future of the company. With 32% and 0.1% of the shares outstanding respectively, Faching Chang and Geode Capital Management, LLC are the second and third largest shareholders. Faching Chang, who is the second-largest shareholder, also happens to hold the title of Top Key Executive.

While it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Newegg Commerce

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 Newegg Commerce, Inc.. Insiders have a US$93m stake in this US$292m business. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 10% stake in the company, and hence can't easily be ignored. 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

We can see that Private Companies own 58%, of the shares on issue. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Newegg Commerce better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Newegg Commerce (of which 1 shouldn't be ignored!) you should know about.

Of course this may not be the best stock to buy. So take a peek at this free 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.