Dianguang Explosion-proof Technology Co.,Ltd.'s (SZSE:002730) market cap surged CN¥282m last week, private companies who have a lot riding on the company were rewarded

Key Insights

• Significant control over Dianguang Explosion-proof TechnologyLtd by private companies implies that the general public has more power to influence management and governance-related decisions
• A total of 2 investors have a majority stake in the company with 50% ownership
• 10% of Dianguang Explosion-proof TechnologyLtd is held by insiders

A look at the shareholders of Dianguang Explosion-proof Technology Co.,Ltd. (SZSE:002730) can tell us which group is most powerful. With 45% stake, private companies possess the maximum shares in the company. Put another way, the group faces the maximum upside potential (or downside risk).

As a result, private companies were the biggest beneficiaries of last week’s 12% gain.

In the chart below, we zoom in on the different ownership groups of Dianguang Explosion-proof TechnologyLtd.

See our latest analysis for Dianguang Explosion-proof TechnologyLtd

What Does The Institutional Ownership Tell Us About Dianguang Explosion-proof TechnologyLtd?

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.

We can see that Dianguang Explosion-proof TechnologyLtd does have institutional investors; and they hold a good portion of the company's stock. 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. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of Dianguang Explosion-proof TechnologyLtd, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Dianguang Explosion-proof TechnologyLtd. Dianguang Technology Co.,Ltd. is currently the largest shareholder, with 45% of shares outstanding. With 5.0% and 3.8% of the shares outstanding respectively, Xiangcai Shi and Sui Shi are the second and third largest shareholders. Xiangcai Shi, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 50% 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. As far as we can tell there isn't analyst coverage of the company, so it is probably flying under the radar.

Insider Ownership Of Dianguang Explosion-proof TechnologyLtd

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.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our most recent data indicates that insiders own a reasonable proportion of Dianguang Explosion-proof Technology Co.,Ltd.. Insiders have a CN¥281m stake in this CN¥2.7b business. 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 39% stake in Dianguang Explosion-proof TechnologyLtd. While this size of ownership may not be enough to sway a policy decision in their favour, they can still make a collective impact on company policies.

Private Company Ownership

We can see that Private Companies own 45%, 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:

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. For instance, we've identified 1 warning sign for Dianguang Explosion-proof TechnologyLtd that you should be aware of.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com