Private companies invested in Genscript Biotech Corporation (HKG:1548) copped the brunt of last week's HK$2.7b market cap decline

Simply Wall St · 10/16 07:37

Key Insights

  • Significant control over Genscript Biotech by private companies implies that the general public has more power to influence management and governance-related decisions
  • A total of 5 investors have a majority stake in the company with 51% ownership
  • Insiders have sold recently

Every investor in Genscript Biotech Corporation (HKG:1548) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are private companies with 45% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, private companies as a group endured the highest losses last week after market cap fell by HK$2.7b.

In the chart below, we zoom in on the different ownership groups of Genscript Biotech.

See our latest analysis for Genscript Biotech

ownership-breakdown
SEHK:1548 Ownership Breakdown October 16th 2024

What Does The Institutional Ownership Tell Us About Genscript Biotech?

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.

We can see that Genscript Biotech does have institutional investors; and they hold a good portion of the company's stock. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Genscript Biotech's historic earnings and revenue below, but keep in mind there's always more to the story.

earnings-and-revenue-growth
SEHK:1548 Earnings and Revenue Growth October 16th 2024

Hedge funds don't have many shares in Genscript Biotech. GenScript Corporation is currently the largest shareholder, with 38% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 7.7% and 2.4%, of the shares outstanding, respectively.

On looking further, we found that 51% of the shares are owned by the top 5 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

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. There are plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Genscript Biotech

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.

Our information suggests that Genscript Biotech Corporation insiders own under 1% of the company. However, it's possible that insiders might have an indirect interest through a more complex structure. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own HK$50m worth of shares. It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

With a 36% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Genscript Biotech. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

Our data indicates that Private Companies hold 45%, 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.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Genscript Biotech better, we need to consider many other factors.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.