Shanghai Chemspec Corporation's (SHSE:688602) stock price dropped 17% last week; private companies would not be happy

Simply Wall St · 10/15 22:55

Key Insights

  • Shanghai Chemspec'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
  • 14% of Shanghai Chemspec is held by Institutions

A look at the shareholders of Shanghai Chemspec Corporation (SHSE:688602) can tell us which group is most powerful. The group holding the most number of shares in the company, around 48% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

And following last week's 17% decline in share price, private companies suffered the most losses.

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

Check out our latest analysis for Shanghai Chemspec

ownership-breakdown
SHSE:688602 Ownership Breakdown October 15th 2024

What Does The Institutional Ownership Tell Us About Shanghai Chemspec?

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.

Shanghai Chemspec already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Shanghai Chemspec, (below). Of course, keep in mind that there are other factors to consider, too.

earnings-and-revenue-growth
SHSE:688602 Earnings and Revenue Growth October 15th 2024

Hedge funds don't have many shares in Shanghai Chemspec. The company's largest shareholder is Ningbo Meishan Bonded Port Area Ouchang Investment Management Co., Ltd., with ownership of 35%. With 11% and 8.8% of the shares outstanding respectively, Ningbo Meishan Bonded Port Area Qinou Investment Partnership Enterprise (Limited Partnership) and China V Fund Management Co., Ltd. are the second and third largest shareholders.

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 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 Shanghai Chemspec

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

We note our data does not show any board members holding shares, personally. It is unusual not to have at least some personal holdings by board members, so our data might be flawed. A good next step would be to check how much the CEO is paid.

General Public Ownership

The general public, who are usually individual investors, hold a 28% stake in Shanghai Chemspec. 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 Equity Ownership

Private equity firms hold a 8.8% stake in Shanghai Chemspec. This suggests they can be influential in key policy decisions. Some might like this, because private equity are sometimes activists who hold management accountable. But other times, private equity is selling out, having taking the company public.

Private Company Ownership

It seems that Private Companies own 48%, of the Shanghai Chemspec stock. 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too. Take risks for example - Shanghai Chemspec has 4 warning signs (and 1 which doesn't sit too well with us) we think you should know about.

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.