Key Insights

• Newegg Commerce's significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• 58% of the company is held by a single shareholder (Hangzhou Lianluo Interactive Information Technology Co.,Ltd)
• 32% of Newegg Commerce is held by insiders

To get a sense of who is truly in control of Newegg Commerce, Inc. (NASDAQ:NEGG), it is important to understand the ownership structure of the business. We can see that private companies own the lion's share in the company with 58% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

Private companies gained the most after market cap touched US$292m last week, while insiders who own 32% also benefitted.

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

What Does The Lack Of Institutional Ownership Tell Us About Newegg Commerce?

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. It is also possible that fund managers don't own the stock because they aren't convinced it will perform well. Newegg Commerce's earnings and revenue track record (below) may not be compelling to institutional investors -- or they simply might not have looked at the business closely.

We note that hedge funds don't have a meaningful investment in Newegg Commerce. Hangzhou Lianluo Interactive Information Technology Co.,Ltd is currently the largest shareholder, with 58% of shares outstanding. This essentially means that they have extensive influence, if not outright control, over the future of the corporation. For context, the second largest shareholder holds about 32% of the shares outstanding, followed by an ownership of 0.1% by the third-largest shareholder. Faching Chang, who is the second-largest shareholder, also happens to hold the title of Top Key Executive.

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. 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 Newegg Commerce

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.

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 Newegg Commerce, Inc.. Insiders have a US$93m stake in this US$292m business. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 10% stake in the company, and hence can't easily be ignored. 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 58%, of the shares on issue. 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Newegg Commerce you should be aware of, and 1 of them is potentially serious.

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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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.