Private companies invested in Huaming Power Equipment Co.,Ltd (SZSE:002270) copped the brunt of last week's CN¥860m market cap decline

Key Insights

• Significant control over Huaming Power EquipmentLtd by private companies implies that the general public has more power to influence management and governance-related decisions
• The top 5 shareholders own 51% of the company
• 22% of Huaming Power EquipmentLtd is held by Institutions

Every investor in Huaming Power Equipment Co.,Ltd (SZSE:002270) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 44% 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.

As a result, private companies as a group endured the highest losses last week after market cap fell by CN¥860m.

Let's delve deeper into each type of owner of Huaming Power EquipmentLtd, beginning with the chart below.

View our latest analysis for Huaming Power EquipmentLtd

What Does The Institutional Ownership Tell Us About Huaming Power EquipmentLtd?

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.

As you can see, institutional investors have a fair amount of stake in Huaming Power EquipmentLtd. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. 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 Huaming Power EquipmentLtd's historic earnings and revenue below, but keep in mind there's always more to the story.

Hedge funds don't have many shares in Huaming Power EquipmentLtd. The company's largest shareholder is Shanghai Huaming Electric Power Equipment Group Co., Ltd., with ownership of 28%. Shanghai Huaming Power Development Co., Ltd. is the second largest shareholder owning 15% of common stock, and Bochun Guo holds about 2.8% of the company stock.

On looking further, we found that 51% of the shares are owned by the top 5 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 plenty of analysts covering the stock, so it might be worth seeing what they are forecasting, too.

Insider Ownership Of Huaming Power EquipmentLtd

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. 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.

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 some shares in Huaming Power Equipment Co.,Ltd. This is a big company, so it is good to see this level of alignment. Insiders own CN¥1.2b worth of shares (at current prices). If you would like to explore the question of insider alignment, 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 27% stake in Huaming Power EquipmentLtd. 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

Our data indicates that Private Companies hold 44%, 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 Huaming Power EquipmentLtd better, we need to consider many other factors. Take risks for example - Huaming Power EquipmentLtd has 1 warning sign we think you should be aware of.

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.