Major groups of shareholders of Gome Finance Technology Co., Ltd. (HKG: 628) have power over the company. Institutions often own shares in larger companies, and we expect to see insiders owning a noticeable percentage of smaller ones. 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 wallet”.
Gome Finance Technology is a small company with a market capitalization of HK$891 million, so it may still fly under the radar of many institutional investors. In the chart below, we can see that institutional investors have yet to buy stocks. Let’s take a closer look at what different types of shareholders can tell us about Gome Finance Technology.
Check out our latest analysis for Gome Finance Technology
What does the lack of institutional ownership tell us about the Gome Finance technology?
Small companies that are not very actively traded often lack institutional investors, but it is less common to see large companies without them.
There are several explanations why institutions do not own stocks. The most common is that the business is too small relative to the funds under management, so the institution doesn’t bother to look closely at the business. It’s also possible that the fund managers don’t own the stock because they aren’t confident it will perform well. Gome Finance Technology’s earnings and revenue (below) may not be compelling to institutional investors – or they may simply not have examined the company closely.
We note that hedge funds have no significant investment in Gome Finance Technology. Our data shows that Juan Du is the largest shareholder with 61% of the outstanding shares. With such a stake in ownership, we infer that they have significant control over the future of the business. For context, the second shareholder owns approximately 11% of the outstanding shares, followed by a 0.2% stake by the third shareholder.
While studying the institutional ownership of a company can add value to your research, it is also recommended that you research analyst recommendations to better understand a stock’s expected performance. We don’t see any analyst coverage of the stock at this time, so the company is unlikely to be widely held.
Owned by Gome Finance Technology Insiders
The definition of an insider may differ slightly from country to country, but board members still matter. The management of the company answers to the board of directors and the latter must represent the interests of the shareholders. In particular, sometimes the senior executives themselves sit on the board of directors.
Insider ownership is positive when it signals that executives think like the true owners of the company. However, strong insider ownership can also give immense power to a small group within the company. This can be negative in certain circumstances.
Our information suggests that insiders own more than half of Gome Finance Technology Co., Ltd. This gives them effective control of the company. So they have a HK$645 million stake in this HK$891 million business. Good to see this level of investment. You can check here if these insiders have bought recently.
General public property
The general public, including retail investors, owns 27% of the company’s capital and therefore cannot be easily ignored. This size of ownership, although considerable, may not be sufficient to change company policy if the decision is not in line with other major shareholders.
I find it very interesting to see who exactly owns a company. But to really get insight, we also need to consider other information. Take for example the ubiquitous specter of investment risk. We have identified 2 warning signs with Gome Finance Technology, and understanding them should be part of your investment process.
Sure this may not be the best stock to buy. Therefore, you may want to see our free set of interesting prospects benefiting from a favorable financial situation.
NB: The figures in this article are calculated using trailing twelve month data, which refers to the 12 month period ending on the last day of the month in which the financial statements are dated. This may not be consistent with the annual report figures for the full year.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.