Hunan Changyuan Lico Co.,Ltd.'s (SHSE:688779) stock price dropped 4.8% last week; private companies would not be happy

Key Insights

• Significant control over Hunan Changyuan LicoLtd by private companies implies that the general public has more power to influence management and governance-related decisions
• The top 4 shareholders own 52% of the company
• 16% of Hunan Changyuan LicoLtd is held by Institutions

To get a sense of who is truly in control of Hunan Changyuan Lico Co.,Ltd. (SHSE:688779), it is important to understand the ownership structure of the business. And the group that holds the biggest piece of the pie are private companies with 46% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, private companies as a group endured the highest losses last week after market cap fell by CN¥559m.

In the chart below, we zoom in on the different ownership groups of Hunan Changyuan LicoLtd.

Check out our latest analysis for Hunan Changyuan LicoLtd

What Does The Institutional Ownership Tell Us About Hunan Changyuan LicoLtd?

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.

We can see that Hunan Changyuan LicoLtd does have institutional investors; and they hold a good portion of the company's stock. 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 Hunan Changyuan LicoLtd's historic earnings and revenue below, but keep in mind there's always more to the story.

Hunan Changyuan LicoLtd is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is China Minmetals Corporation with 34% of shares outstanding. With 8.6% and 6.4% of the shares outstanding respectively, Ningbo Chuangyuan Jianhe Investment Management Co., Ltd. and China Reform Venture Capital Investment Management (Shenzhen) Ltd. are the second and third largest shareholders.

On looking further, we found that 52% 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 it makes sense to study institutional ownership data for a company, it also makes sense to study analyst sentiments to know which way the wind is blowing. 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 Hunan Changyuan LicoLtd

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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.

Our most recent data indicates that insiders own less than 1% of Hunan Changyuan Lico Co.,Ltd.. But they may have an indirect interest through a corporate structure that we haven't picked up on. Keep in mind that it's a big company, and the insiders own CN¥43k worth of shares. The absolute value might be more important than the proportional share. 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, who are usually individual investors, hold a 32% stake in Hunan Changyuan LicoLtd. 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

Private equity firms hold a 6.4% stake in Hunan Changyuan LicoLtd. This suggests they can be influential in key policy decisions. Some investors might be encouraged by this, since private equity are sometimes able to encourage strategies that help the market see the value in the company. Alternatively, those holders might be exiting the investment after taking it public.

Private Company Ownership

It seems that Private Companies own 46%, of the Hunan Changyuan LicoLtd 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.

I like to dive deeper into how a company has performed in the past. You can access this interactive graph of past earnings, revenue and cash flow, for free.

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.