Individual investors invested in Wuxi New Hongtai Electrical Technology Co.,Ltd (SHSE:603016) copped the brunt of last week's CN¥653m market cap decline

Key Insights

• Significant control over Wuxi New Hongtai Electrical TechnologyLtd by individual investors implies that the general public has more power to influence management and governance-related decisions
• 51% of the business is held by the top 4 shareholders
• Insider ownership in Wuxi New Hongtai Electrical TechnologyLtd is 30%

To get a sense of who is truly in control of Wuxi New Hongtai Electrical Technology Co.,Ltd (SHSE:603016), it is important to understand the ownership structure of the business. We can see that individual investors own the lion's share in the company with 41% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

While insiders, who own 30% shares weren’t spared from last week’s CN¥653m market cap drop, individual investors as a group suffered the maximum losses

In the chart below, we zoom in on the different ownership groups of Wuxi New Hongtai Electrical TechnologyLtd.

Check out our latest analysis for Wuxi New Hongtai Electrical TechnologyLtd

What Does The Lack Of Institutional Ownership Tell Us About Wuxi New Hongtai Electrical TechnologyLtd?

We don't tend to see institutional investors holding stock of companies that are very risky, thinly traded, or very small. Though we do sometimes see large companies without institutions on the register, it's not particularly common.

There are many reasons why a company might not have any institutions on the share registry. It may be hard for institutions to buy large amounts of shares, if liquidity (the amount of shares traded each day) is low. If the company has not needed to raise capital, institutions might lack the opportunity to build a position. Alternatively, there might be something about the company that has kept institutional investors away. Wuxi New Hongtai Electrical TechnologyLtd might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

Hedge funds don't have many shares in Wuxi New Hongtai Electrical TechnologyLtd. The company's CEO Min Hai Zhao is the largest shareholder with 18% of shares outstanding. For context, the second largest shareholder holds about 16% of the shares outstanding, followed by an ownership of 12% by the third-largest shareholder.

On looking further, we found that 51% of the shares are owned by the top 4 shareholders. In other words, these shareholders have a meaningful say in the decisions of the company.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Wuxi New Hongtai Electrical TechnologyLtd

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. 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 information suggests that insiders maintain a significant holding in Wuxi New Hongtai Electrical Technology Co.,Ltd. It has a market capitalization of just CN¥5.1b, and insiders have CN¥1.5b worth of shares in their own names. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 41% stake in the company, and hence can't easily be ignored. 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 16%, private equity firms could influence the Wuxi New Hongtai Electrical TechnologyLtd 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.

Private Company Ownership

It seems that Private Companies own 12%, of the Wuxi New Hongtai Electrical TechnologyLtd 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Wuxi New Hongtai Electrical TechnologyLtd is showing 2 warning signs in our investment analysis , 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.