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The big shareholder groups in SemiLEDs Corporation (NASDAQ:LEDS) have power over the company. Institutions often own shares in more established companies, while it's not unusual to see insiders own a fair bit of smaller companies. Warren Buffett said that he likes 'a business with enduring competitive advantages that is run by able and owner-oriented people'. So it's nice to see some insider ownership, because it may suggest that management is owner-oriented.
With a market capitalization of US$8.8m, SemiLEDs is a small cap stock, so it might not be well known by many institutional investors. Taking a look at our data on the ownership groups (below), it's seems that institutions don't own many shares in the company. We can zoom in on the different ownership groups, to learn more about LEDS.
What Does The Institutional Ownership Tell Us About SemiLEDs?
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.
Institutions own less than 5% of SemiLEDs. That indicates that the company is on the radar of some funds, but it isn't particularly popular with professional investors at the moment. If the company is growing earnings, that may indicate that it is just beginning to catch the attention of these deep-pocketed investors. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.
We note that hedge funds don't have a meaningful investment in SemiLEDs. As far I can tell there isn't analyst coverage of the company, so it is probably flying under the radar.
Insider Ownership Of SemiLEDs
While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.
Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.
Our most recent data indicates that insiders own a reasonable proportion of SemiLEDs Corporation. Insiders have a US$1.7m stake in this US$8.8m 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 -- mostly retail investors -- own 52% of SemiLEDs . This level of ownership gives retail investors the power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.
Private Company Ownership
Our data indicates that Private Companies hold 28%, of the company's shares. 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.
While it is well worth considering the different groups that own a company, there are other factors that are even more important.
I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.
If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.
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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