Institutional owners may consider drastic measures as Shenzhen Inovance Technology Co.,Ltd's (SZSE:300124) recent CN¥9.6b drop adds to long-term losses

Key Insights

• Given the large stake in the stock by institutions, Shenzhen Inovance TechnologyLtd's stock price might be vulnerable to their trading decisions
• The top 20 shareholders own 50% of the company
• Insiders own 25% of Shenzhen Inovance TechnologyLtd

Every investor in Shenzhen Inovance Technology Co.,Ltd (SZSE:300124) should be aware of the most powerful shareholder groups. With 31% stake, institutions possess the maximum shares in the company. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

As a result, institutional investors endured the highest losses last week after market cap fell by CN¥9.6b. Needless to say, the recent loss which further adds to the one-year loss to shareholders of 3.3% might not go down well especially with this category of shareholders. Often called “market movers", institutions wield significant power in influencing the price dynamics of any stock. Hence, if weakness in Shenzhen Inovance TechnologyLtd's share price continues, institutional investors may feel compelled to sell the stock, which might not be ideal for individual investors.

In the chart below, we zoom in on the different ownership groups of Shenzhen Inovance TechnologyLtd.

View our latest analysis for Shenzhen Inovance TechnologyLtd

What Does The Institutional Ownership Tell Us About Shenzhen Inovance TechnologyLtd?

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.

Shenzhen Inovance TechnologyLtd already has institutions on the share registry. Indeed, they own a respectable stake in the company. 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 Inovance TechnologyLtd'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 Shenzhen Inovance TechnologyLtd. Looking at our data, we can see that the largest shareholder is Shenzhen Hui Chuan Investment Co., Ltd with 17% of shares outstanding. With 3.0% and 2.8% of the shares outstanding respectively, Guowei Liu and Juntian Li are the second and third largest shareholders. Juntian Li, who is the third-largest shareholder, also happens to hold the title of Member of the Board of Directors. In addition, we found that Xingming Zhu, the CEO has 2.1% of the shares allocated to their name.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 20 shareholders, meaning that no single shareholder has a majority interest in the ownership.

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. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of Shenzhen Inovance TechnologyLtd

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.

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 Inovance Technology Co.,Ltd. It has a market capitalization of just CN¥145b, and insiders have CN¥36b 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 27% stake in Shenzhen Inovance TechnologyLtd. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Private Company Ownership

It seems that Private Companies own 17%, of the Shenzhen Inovance TechnologyLtd stock. It's hard to draw any conclusions from this fact alone, so its worth looking into who owns those private companies. Sometimes insiders or other related parties have an interest in shares in a public company through a separate private company.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. For instance, we've identified 1 warning sign for Shenzhen Inovance TechnologyLtd that you should be aware of.

If you would prefer discover what analysts are predicting in terms of future growth, do not miss this free report on analyst forecasts.

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.