The Bank of East Asia, Limited's (HKG:23) largest shareholders are private companies who were rewarded as market cap surged HK$3.2b last week

Key Insights

• Bank of East Asia's significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• 55% of the business is held by the top 3 shareholders
• Ownership research along with analyst forecasts data help provide a good understanding of opportunities in a stock

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To get a sense of who is truly in control of The Bank of East Asia, Limited (HKG:23), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are private companies with 36% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private companies collectively scored the highest last week as the company hit HK$39b market cap following a 8.8% gain in the stock.

In the chart below, we zoom in on the different ownership groups of Bank of East Asia.

See our latest analysis for Bank of East Asia

What Does The Institutional Ownership Tell Us About Bank of East Asia?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

Less than 5% of Bank of East Asia is held by institutional investors. This suggests that some funds have the company in their sights, but many have not yet bought shares in it. 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.

Bank of East Asia is not owned by hedge funds. Our data shows that Sumitomo Mitsui Financial Group, Inc. is the largest shareholder with 20% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 19% and 16%, of the shares outstanding, respectively.

A more detailed study of the shareholder registry showed us that 3 of the top shareholders have a considerable amount of ownership in the company, via their 55% stake.

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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Bank of East Asia

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

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.

We can report that insiders do own shares in The Bank of East Asia, Limited. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around HK$3.8b worth of shares (at current prices). Most would say this shows alignment of interests between shareholders and the board. Still, it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 30% stake in the company, and hence can't easily be ignored. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Company Ownership

Our data indicates that Private Companies hold 36%, 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.

Public Company Ownership

We can see that public companies hold 20% of the Bank of East Asia shares on issue. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Bank of East Asia better, we need to consider many other factors. For instance, we've identified 2 warning signs for Bank of East Asia (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.

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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.