Wetown Electric Group Co., Ltd.'s (SHSE:688226) last week's 14% decline must have disappointed private companies who have a significant stake

Key Insights

• The considerable ownership by private companies in Wetown Electric Group indicates that they collectively have a greater say in management and business strategy
• 51% of the business is held by the top 3 shareholders
• Insider ownership in Wetown Electric Group is 22%

A look at the shareholders of Wetown Electric Group Co., Ltd. (SHSE:688226) can tell us which group is most powerful. The group holding the most number of shares in the company, around 38% to be precise, is private companies. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Following a 14% decrease in the stock price last week, private companies suffered the most losses, but insiders who own 22% stock also took a hit.

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

View our latest analysis for Wetown Electric Group

What Does The Institutional Ownership Tell Us About Wetown Electric Group?

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.

As you can see, institutional investors have a fair amount of stake in Wetown Electric Group. This can indicate that the company has a certain degree of credibility in the investment community. However, it is best to be wary of relying on the supposed validation that comes with institutional investors. They too, get it wrong sometimes. If multiple institutions change their view on a stock at the same time, you could see the share price drop fast. It's therefore worth looking at Wetown Electric Group's earnings history below. Of course, the future is what really matters.

We note that hedge funds don't have a meaningful investment in Wetown Electric Group. Wengong Jiang is currently the company's largest shareholder with 22% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 20% and 8.1%, of the shares outstanding, respectively.

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 51% 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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Wetown Electric Group

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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 Wetown Electric Group Co., Ltd.. It has a market capitalization of just CN¥3.1b, and insiders have CN¥700m worth of shares in their own names. We would say this shows alignment with shareholders, but it is worth noting that the company is still quite small; some insiders may have founded the business. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public, who are usually individual investors, hold a 19% stake in Wetown Electric Group. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

We can see that Private Companies own 38%, 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 Wetown Electric Group better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Wetown Electric Group (at least 2 which don't sit too well with us) , and understanding them should be part of your investment process.

If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its 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.