Top Key Executive Yong Liu, EDA Group Holdings Limited's (HKG:2505) largest shareholder sees value of holdings go down 10% after recent drop

Key Insights

• Insiders appear to have a vested interest in EDA Group Holdings' growth, as seen by their sizeable ownership
• 65% of the business is held by the top 2 shareholders
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

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To get a sense of who is truly in control of EDA Group Holdings Limited (HKG:2505), it is important to understand the ownership structure of the business. With 45% stake, individual insiders possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

As market cap fell to HK$786m last week, insiders would have faced the highest losses than any other shareholder groups of the company.

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

See our latest analysis for EDA Group Holdings

What Does The Lack Of Institutional Ownership Tell Us About EDA Group Holdings?

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 multiple explanations for why institutions don't own a stock. The most common is that the company is too small relative to funds under management, so the institution does not bother to look closely at the company. Alternatively, there might be something about the company that has kept institutional investors away. Institutional investors may not find the historic growth of the business impressive, or there might be other factors at play. You can see the past revenue performance of EDA Group Holdings, for yourself, below.

EDA Group Holdings is not owned by hedge funds. Because actions speak louder than words, we consider it a good sign when insiders own a significant stake in a company. In EDA Group Holdings' case, its Top Key Executive, Yong Liu, is the largest shareholder, holding 35% of shares outstanding. In comparison, the second and third largest shareholders hold about 30% and 2.4% of the stock. Interestingly, the third-largest shareholder, Manlun Zuo is also a Member of the Board of Directors, again, indicating strong insider ownership amongst the company's top shareholders.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. 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 EDA Group Holdings

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.

Our most recent data indicates that insiders own a reasonable proportion of EDA Group Holdings Limited. It has a market capitalization of just HK$786m, and insiders have HK$354m worth of shares in their own names. 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-- including retail investors -- own 24% 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.

Private Company Ownership

Our data indicates that Private Companies hold 30%, of the company's shares. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 1 warning sign we've spotted with EDA Group Holdings .

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.