Shenzhen Megmeet Electrical Co., LTD's (SZSE:002851) stock price dropped 5.7% last week; retail investors would not be happy

Key Insights

• The considerable ownership by retail investors in Shenzhen Megmeet Electrical indicates that they collectively have a greater say in management and business strategy
• The top 25 shareholders own 49% of the company
• Insider ownership in Shenzhen Megmeet Electrical is 29%

A look at the shareholders of Shenzhen Megmeet Electrical Co., LTD (SZSE:002851) can tell us which group is most powerful. We can see that retail investors own the lion's share in the company with 50% ownership. Put another way, the group faces the maximum upside potential (or downside risk).

While insiders who own 29% came under pressure after market cap dropped to CN¥13b last week,retail investors took the most losses.

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?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

We can see that Shenzhen Megmeet Electrical 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 Shenzhen Megmeet Electrical, (below). Of course, keep in mind that there are other factors to consider, too.

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 19% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 4.9% and 4.0%, of the shares outstanding, respectively.

A deeper look at our ownership data shows that the top 25 shareholders collectively hold less than half of the register, suggesting a large group of small holders where no single shareholder has a majority.

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 Shenzhen Megmeet Electrical

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

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 Shenzhen Megmeet Electrical Co., LTD. It has a market capitalization of just CN¥13b, and insiders have CN¥3.9b 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 -- including retail investors -- own 50% of Shenzhen Megmeet Electrical. This size of ownership gives investors from the general public some collective power. They can and probably do influence decisions on executive compensation, dividend policies and proposed business acquisitions.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Shenzhen Megmeet Electrical better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Shenzhen Megmeet Electrical (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

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.

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

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