Could 7Road Holdings Limited’s (HKG:797) Investor Composition Influence The Stock Price?

A look at the shareholders of 7Road Holdings Limited (HKG:797) can tell us which group is most powerful. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. I quite like to see at least a little bit of insider ownership. As Charlie Munger said ‘Show me the incentive and I will show you the outcome.

With a market capitalization of HK$7.2b, 7Road Holdings is a decent size, so it is probably on the radar of institutional investors. Taking a look at our data on the ownership groups (below), it’s seems that institutions own shares in the company. Let’s delve deeper into each type of owner, to discover more about 797.

View our latest analysis for 7Road Holdings

SEHK:797 Ownership Summary, October 23rd 2019
SEHK:797 Ownership Summary, October 23rd 2019

What Does The Institutional Ownership Tell Us About 7Road Holdings?

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.

7Road Holdings already has institutions on the share registry. Indeed, they own 14% of 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. 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 7Road Holdings’s historic earnings and revenue, below, but keep in mind there’s always more to the story.

SEHK:797 Income Statement, October 23rd 2019
SEHK:797 Income Statement, October 23rd 2019

Hedge funds don’t have many shares in 7Road Holdings. Our information suggests that there isn’t any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of 7Road Holdings

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.

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.

Our most recent data indicates that insiders own a reasonable proportion of 7Road Holdings Limited. Insiders own HK$3.4b worth of shares in the HK$7.2b company. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

With a 28% ownership, the general public have some degree of sway over 797. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Equity Ownership

Private equity firms hold a 6.7% stake in 797. This suggests they can be influential in key policy decisions. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and — as the name suggests — don’t invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Private Company Ownership

It seems that Private Companies own 5.0%, of the 797 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:

It’s always worth thinking about the different groups who own shares in a company. But to understand 7Road Holdings 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.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.