China Zhonghua Geotechnical Engineering Group Co., Ltd.'s (SZSE:002542) stock price dropped 13% last week; retail investors would not be happy

Key Insights

• The considerable ownership by retail investors in China Zhonghua Geotechnical Engineering Group indicates that they collectively have a greater say in management and business strategy
• 47% of the business is held by the top 16 shareholders
• 18% of China Zhonghua Geotechnical Engineering Group is held by insiders

Every investor in China Zhonghua Geotechnical Engineering Group Co., Ltd. (SZSE:002542) should be aware of the most powerful shareholder groups. With 53% stake, retail investors possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, retail investors as a group endured the highest losses last week after market cap fell by CN¥1.3b.

In the chart below, we zoom in on the different ownership groups of China Zhonghua Geotechnical Engineering Group.

Check out our latest analysis for China Zhonghua Geotechnical Engineering Group

What Does The Lack Of Institutional Ownership Tell Us About China Zhonghua Geotechnical Engineering Group?

We don't tend to see institutional investors holding stock of companies that are very risky, thinly traded, or very small. Though we do sometimes see large companies without institutions on the register, it's not particularly common.

There are multiple explanations for why institutions don't own a stock. The most common is that the company is too small relative to funds under management, so the institution does not bother to look closely at the company. On the other hand, it's always possible that professional investors are avoiding a company because they don't think it's the best place for their money. China Zhonghua Geotechnical Engineering Group might not have the sort of past performance institutions are looking for, or perhaps they simply have not studied the business closely.

Hedge funds don't have many shares in China Zhonghua Geotechnical Engineering Group. Chengdu Xingcheng Investment Group Co.,Ltd is currently the largest shareholder, with 29% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 11% and 1.8%, of the shares outstanding, respectively. Zhongchi Liu, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors.

Our studies suggest that the top 16 shareholders collectively control less than half of the company's shares, meaning that the company's shares are widely disseminated and there is no dominant shareholder.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of China Zhonghua Geotechnical Engineering Group

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 information suggests that insiders maintain a significant holding in China Zhonghua Geotechnical Engineering Group Co., Ltd.. It has a market capitalization of just CN¥8.3b, and insiders have CN¥1.5b worth of shares in their own names. That's quite significant. Most would say this shows a good degree of alignment with shareholders, especially in a company of this size. 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 substantial 53% stake in China Zhonghua Geotechnical Engineering Group, suggesting it is a fairly popular stock. This level of ownership gives investors from the wider public some power to sway key policy decisions such as board composition, executive compensation, and the dividend payout ratio.

Private Company Ownership

It seems that Private Companies own 29%, of the China Zhonghua Geotechnical Engineering Group stock. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for China Zhonghua Geotechnical Engineering Group you should know about.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

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.