FAWER Automotive Parts Limited Company's (SZSE:000030) market cap dropped CN¥464m last week; Private equity firms bore the brunt

Key Insights

• The considerable ownership by private equity firms in FAWER Automotive Parts Limited indicates that they collectively have a greater say in management and business strategy
• 60% of the business is held by the top 3 shareholders
• Ownership research, combined with past performance data can help provide a good understanding of opportunities in a stock

A look at the shareholders of FAWER Automotive Parts Limited Company (SZSE:000030) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are private equity firms with 56% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private equity firms as a group endured the highest losses last week after market cap fell by CN¥464m.

Let's delve deeper into each type of owner of FAWER Automotive Parts Limited, beginning with the chart below.

View our latest analysis for FAWER Automotive Parts Limited

What Does The Institutional Ownership Tell Us About FAWER Automotive Parts Limited?

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 FAWER Automotive Parts Limited. 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 FAWER Automotive Parts Limited'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 FAWER Automotive Parts Limited. Faw Equity Investment (Tianjin) Co., Ltd. is currently the company's largest shareholder with 26% of shares outstanding. In comparison, the second and third largest shareholders hold about 19% and 15% of the stock.

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 60% stake.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of FAWER Automotive Parts Limited

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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 FAWER Automotive Parts Limited Company insiders own under 1% of the company. 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¥51m worth of shares (at current prices). It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public, who are usually individual investors, hold a 23% stake in FAWER Automotive Parts Limited. 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

With a stake of 56%, private equity firms could influence the FAWER Automotive Parts Limited board. 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.

Public Company Ownership

We can see that public companies hold 15% of the FAWER Automotive Parts Limited shares on issue. This may be a strategic interest and the two companies may have related business interests. It could be that they have de-merged. This holding is probably worth investigating further.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand FAWER Automotive Parts Limited better, we need to consider many other factors. Take risks for example - FAWER Automotive Parts Limited has 3 warning signs (and 1 which is significant) we think you should know about.

Of course this may not be the best stock to buy. So take a peek at this free 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.

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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.