To get a sense of who is truly in control of Zhejiang Hechuan Technology Co., Ltd. (SHSE:688320), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are retail investors with 34% ownership. Put another way, the group faces the maximum upside potential (or downside risk).
While insiders who own 31% came under pressure after market cap dropped to CN¥4.1b last week,retail investors took the most losses.
Let's take a closer look to see what the different types of shareholders can tell us about Zhejiang Hechuan Technology.
View our latest analysis for Zhejiang Hechuan Technology
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.
As you can see, institutional investors have a fair amount of stake in Zhejiang Hechuan Technology. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Zhejiang Hechuan Technology's historic earnings and revenue below, but keep in mind there's always more to the story.
We note that hedge funds don't have a meaningful investment in Zhejiang Hechuan Technology. Xiangbin Wang is currently the largest shareholder, with 15% of shares outstanding. For context, the second largest shareholder holds about 9.2% of the shares outstanding, followed by an ownership of 7.2% by the third-largest shareholder. Henghui Xiang, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors. Additionally, the company's CEO Xiaojie Xu directly holds 3.0% of the total shares outstanding.
On further inspection, we found that more than half the company's shares are owned by the top 9 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.
Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.
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.
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 Zhejiang Hechuan Technology Co., Ltd.. Insiders own CN¥1.3b worth of shares in the CN¥4.1b company. 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.
The general public-- including retail investors -- own 34% 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.
Our data indicates that Private Companies hold 14%, of the company's shares. 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.
It's always worth thinking about the different groups who own shares in a company. But to understand Zhejiang Hechuan Technology better, we need to consider many other factors. Take risks for example - Zhejiang Hechuan Technology has 1 warning sign we think you should be aware of.
If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
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.