Farasis Energy (Gan Zhou) Co., Ltd.'s (SHSE:688567) stock price dropped 10.0% last week; individual investors would not be happy

Key Insights

• Farasis Energy (Gan Zhou)'s significant individual investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• 52% of the business is held by the top 8 shareholders
• Institutions own 14% of Farasis Energy (Gan Zhou)

To get a sense of who is truly in control of Farasis Energy (Gan Zhou) Co., Ltd. (SHSE:688567), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are individual investors with 37% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And following last week's 10.0% decline in share price, individual investors suffered the most losses.

Let's take a closer look to see what the different types of shareholders can tell us about Farasis Energy (Gan Zhou).

See our latest analysis for Farasis Energy (Gan Zhou)

What Does The Institutional Ownership Tell Us About Farasis Energy (Gan Zhou)?

Institutional investors commonly compare their own returns to the returns of a commonly followed index. So they generally do consider buying larger companies that are included in the relevant benchmark index.

Farasis Energy (Gan Zhou) already has institutions on the share registry. Indeed, they own a respectable stake in the company. This implies the analysts working for those institutions have looked at the stock and they like it. But just like anyone else, they could be wrong. 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 Farasis Energy (Gan Zhou)'s historic earnings and revenue below, but keep in mind there's always more to the story.

Farasis Energy (Gan Zhou) is not owned by hedge funds. Our data shows that Farasis Energy, Inc. is the largest shareholder with 20% of shares outstanding. With 11% and 4.0% of the shares outstanding respectively, China Reform Venture Capital Investment Management (Shenzhen) Ltd. and Guangzhou Industrial Investment Holdings Group are the second and third largest shareholders.

On further inspection, we found that more than half the company's shares are owned by the top 8 shareholders, suggesting that the interests of the larger shareholders are balanced out to an extent by the smaller ones.

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. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Farasis Energy (Gan Zhou)

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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 data suggests that insiders own under 1% of Farasis Energy (Gan Zhou) Co., Ltd. in their own names. But they may have an indirect interest through a corporate structure that we haven't picked up on. 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¥8.7m worth of shares (at current prices). Arguably, recent buying and selling is just as important to consider. You can click here to see if insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 37% stake in the company, and hence can't easily be ignored. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Equity Ownership

With an ownership of 11%, private equity firms are in a position to play a role in shaping corporate strategy with a focus on value creation. Sometimes we see private equity stick around for the long term, but generally speaking they have a shorter investment horizon and -- as the name suggests -- don't invest in public companies much. After some time they may look to sell and redeploy capital elsewhere.

Private Company Ownership

It seems that Private Companies own 35%, of the Farasis Energy (Gan Zhou) stock. 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:

I find it very interesting to look at who exactly owns a company. But to truly gain insight, we need to consider other information, too.

I like to dive deeper into how a company has performed in the past. You can find historic revenue and earnings in this detailed graph.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.