Key Insights

• Significant insider control over Digital Domain Holdings implies vested interests in company growth
• 55% of the business is held by the top 6 shareholders
• Insiders have been buying lately

A look at the shareholders of Digital Domain Holdings Limited (HKG:547) can tell us which group is most powerful. The group holding the most number of shares in the company, around 49% to be precise, is individual insiders. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Having purchased shares recently, insiders must be glad after market cap hit HK$3.7b last week.

In the chart below, we zoom in on the different ownership groups of Digital Domain Holdings.

What Does The Lack Of Institutional Ownership Tell Us About Digital Domain 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 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. 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 Digital Domain Holdings, for yourself, below.

Hedge funds don't have many shares in Digital Domain Holdings. The company's largest shareholder is ADATA Technology Co., Ltd., with ownership of 19%. With 9.5% and 6.7% of the shares outstanding respectively, Hoi See Song and Poly Culture Group Corporation Limited are the second and third largest shareholders. In addition, we found that Ang Seah, the CEO has 0.6% of the shares allocated to their name.

On further inspection, we found that more than half the company's shares are owned by the top 6 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Digital Domain Holdings

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

It seems insiders own a significant proportion of Digital Domain Holdings Limited. Insiders own HK$1.8b worth of shares in the HK$3.7b company. 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

With a 23% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Digital Domain Holdings. 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 8.2%, 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.

Public Company Ownership

Public companies currently own 19% of Digital Domain Holdings stock. We can't be certain but it is quite possible this is a strategic stake. The businesses may be similar, or work together.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Digital Domain Holdings (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

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.