Shenzhen Megmeet Electrical Co., LTD's (SZSE:002851) market cap dropped CN¥1.3b last week; Retail investors bore the brunt

Key Insights

• Shenzhen Megmeet Electrical's significant retail investors ownership suggests that the key decisions are influenced by shareholders from the larger public
• A total of 16 investors have a majority stake in the company with 50% ownership
• Insiders own 33% of Shenzhen Megmeet Electrical

To get a sense of who is truly in control of Shenzhen Megmeet Electrical Co., LTD (SZSE:002851), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 46% to be precise, is retail investors. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

Following a 3.9% decrease in the stock price last week, retail investors suffered the most losses, but insiders who own 33% stock also took a hit.

In the chart below, we zoom in on the different ownership groups of Shenzhen Megmeet Electrical.

Check out our latest analysis for Shenzhen Megmeet Electrical

What Does The Institutional Ownership Tell Us About Shenzhen Megmeet Electrical?

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 Shenzhen Megmeet Electrical 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 Shenzhen Megmeet Electrical's historic earnings and revenue below, but keep in mind there's always more to the story.

Shenzhen Megmeet Electrical is not owned by hedge funds. Looking at our data, we can see that the largest shareholder is the CEO Yongsheng Tong with 25% of shares outstanding. For context, the second largest shareholder holds about 4.5% of the shares outstanding, followed by an ownership of 3.7% by the third-largest shareholder.

A closer look at our ownership figures suggests that the top 16 shareholders have a combined ownership of 50% implying that no single shareholder has a majority.

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 Shenzhen Megmeet Electrical

The definition of company insiders can be subjective and does vary between jurisdictions. Our data reflects individual insiders, capturing board members at the very least. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

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 information suggests that insiders maintain a significant holding in Shenzhen Megmeet Electrical Co., LTD. Insiders own CN¥11b worth of shares in the CN¥32b company. That's quite meaningful. It is good to see this level of investment. You can check here to see if those insiders have been buying recently.

General Public Ownership

The general public-- including retail investors -- own 46% stake in the company, and hence can't easily be ignored. 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.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Shenzhen Megmeet Electrical (at least 1 which is significant) , and understanding them should be part of your investment process.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter 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.