Key Insights

• Institutions' substantial holdings in Silicon Motion Technology implies that they have significant influence over the company's share price
• The top 22 shareholders own 51% of the company
• Analyst forecasts along with ownership data serve to give a strong idea about prospects for a business

To get a sense of who is truly in control of Silicon Motion Technology Corporation (NASDAQ:SIMO), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 84% to be precise, is institutions. Put another way, the group faces the maximum upside potential (or downside risk).

Institutional investors would appreciate the 5.6% increase in share price last week, given their one-year losses have totalled a disappointing 0.4%.

In the chart below, we zoom in on the different ownership groups of Silicon Motion Technology.

See our latest analysis for Silicon Motion Technology

What Does The Institutional Ownership Tell Us About Silicon Motion Technology?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

As you can see, institutional investors have a fair amount of stake in Silicon Motion Technology. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Silicon Motion Technology, (below). Of course, keep in mind that there are other factors to consider, too.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. Silicon Motion Technology is not owned by hedge funds. FMR LLC is currently the largest shareholder, with 6.6% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 4.0% and 3.3%, of the shares outstanding, respectively. Additionally, the company's CEO Chia-Chang Kou directly holds 1.3% of the total shares outstanding.

Looking at the shareholder registry, we can see that 51% of the ownership is controlled by the top 22 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Silicon Motion Technology

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. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

We can see that insiders own shares in Silicon Motion Technology Corporation. It is a pretty big company, so it is generally a positive to see some potentially meaningful alignment. In this case, they own around US$101m 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

With a 11% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Silicon Motion Technology. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

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 1 warning sign with Silicon Motion Technology , and understanding them should be part of your investment process.

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.