Private companies are IKD Co., Ltd.'s (SHSE:600933) biggest owners and were rewarded after market cap rose by CN¥440m last week

Key Insights

• IKD's significant private companies ownership suggests that the key decisions are influenced by shareholders from the larger public
• 53% of the business is held by the top 5 shareholders
• 12% of IKD is held by insiders

Every investor in IKD Co., Ltd. (SHSE:600933) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 44% to be precise, is private companies. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private companies were the biggest beneficiaries of last week’s 3.3% gain.

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

View our latest analysis for IKD

What Does The Institutional Ownership Tell Us About IKD?

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.

We can see that IKD 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 IKD's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in IKD. Our data shows that Ningbo IKD Investment Management Co., Ltd. is the largest shareholder with 30% of shares outstanding. Jiancheng Zhang is the second largest shareholder owning 7.5% of common stock, and Leanauto Group Hk Limited holds about 6.7% of the company stock. Jiancheng Zhang, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

On looking further, we found that 53% 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.

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

Insider Ownership Of IKD

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 IKD Co., Ltd.. It is very interesting to see that insiders have a meaningful CN¥1.7b stake in this CN¥14b business. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 28% stake in IKD. 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 Company Ownership

We can see that Private Companies own 44%, of the shares on issue. It might be worth looking deeper into this. If related parties, such as insiders, have an interest in one of these private companies, that should be disclosed in the annual report. Private companies may also have a strategic interest in the company.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand IKD better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with IKD , and understanding them should be part of your investment process.

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.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com