The recent CN¥445m market cap decrease is likely to have disappointed insiders invested in SEC Electric Machinery Co., Ltd. (SHSE:603988)

Key Insights

• Insiders appear to have a vested interest in SEC Electric Machinery's growth, as seen by their sizeable ownership
• 60% of the business is held by the top 3 shareholders
• Past performance of a company along with ownership data serve to give a strong idea about prospects for a business

A look at the shareholders of SEC Electric Machinery Co., Ltd. (SHSE:603988) can tell us which group is most powerful. And the group that holds the biggest piece of the pie are individual insiders with 37% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As market cap fell to CN¥3.2b last week, insiders would have faced the highest losses than any other shareholder groups of the company.

Let's delve deeper into each type of owner of SEC Electric Machinery, beginning with the chart below.

View our latest analysis for SEC Electric Machinery

What Does The Institutional Ownership Tell Us About SEC Electric Machinery?

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.

Less than 5% of SEC Electric Machinery is held by institutional investors. This suggests that some funds have the company in their sights, but many have not yet bought shares in it. So if the company itself can improve over time, we may well see more institutional buyers in the future. When multiple institutional investors want to buy shares, we often see a rising share price. The past revenue trajectory (shown below) can be an indication of future growth, but there are no guarantees.

We note that hedge funds don't have a meaningful investment in SEC Electric Machinery. Our data shows that Ningbo Juntuo Enterprise Management Co., Ltd. is the largest shareholder with 23% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 22% and 15%, of the shares outstanding, respectively. Jianyu Wang, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of SEC Electric Machinery

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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

It seems insiders own a significant proportion of SEC Electric Machinery Co., Ltd.. Insiders have a CN¥1.2b stake in this CN¥3.2b business. 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

The general public, who are usually individual investors, hold a 35% stake in SEC Electric Machinery. 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

Our data indicates that Private Companies hold 23%, of the company's shares. 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 SEC Electric Machinery better, we need to consider many other factors. Take risks for example - SEC Electric Machinery has 4 warning signs (and 2 which make us uncomfortable) we think you should know about.

If you would prefer check out another company -- one with potentially superior financials -- then do not miss this free list of interesting companies, backed by strong financial data.

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.