Private companies in Xiamen Faratronic Co., Ltd. (SHSE:600563) are its biggest bettors, and their bets paid off as stock gained 12% last week

Key Insights

• The considerable ownership by private companies in Xiamen Faratronic indicates that they collectively have a greater say in management and business strategy
• 52% of the business is held by the top 4 shareholders
• 28% of Xiamen Faratronic is held by Institutions

To get a sense of who is truly in control of Xiamen Faratronic Co., Ltd. (SHSE:600563), it is important to understand the ownership structure of the business. With 43% stake, private companies possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

Clearly, private companies benefitted the most after the company's market cap rose by CN¥2.7b last week.

Let's delve deeper into each type of owner of Xiamen Faratronic, beginning with the chart below.

View our latest analysis for Xiamen Faratronic

What Does The Institutional Ownership Tell Us About Xiamen Faratronic?

Institutions typically measure themselves against a benchmark when reporting to their own investors, so they often become more enthusiastic about a stock once it's included in a major index. We would expect most companies to have some institutions on the register, especially if they are growing.

As you can see, institutional investors have a fair amount of stake in Xiamen Faratronic. 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. 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 Xiamen Faratronic'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 Xiamen Faratronic. The company's largest shareholder is Xiamen Farah development Corp, with ownership of 37%. First Seafront Fund Management Co., Ltd is the second largest shareholder owning 5.6% of common stock, and Xiamen C&D Corporation Limited holds about 5.3% of the company stock.

To make our study more interesting, we found that the top 4 shareholders control more than half of the company which implies that this group has considerable sway over the company's decision-making.

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 a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Xiamen Faratronic

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. 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 most recent data indicates that insiders own less than 1% of Xiamen Faratronic Co., Ltd.. But they may have an indirect interest through a corporate structure that we haven't picked up on. It is a pretty big company, so it would be possible for board members to own a meaningful interest in the company, without owning much of a proportional interest. In this case, they own around CN¥137k worth of shares (at current prices). It is good to see board members owning shares, but it might be worth checking if those insiders have been buying.

General Public Ownership

The general public, who are usually individual investors, hold a 29% stake in Xiamen Faratronic. 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

We can see that Private Companies own 43%, 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Xiamen Faratronic 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.

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.