Zhejiang Hongchang Electrical Technology Co., Ltd.'s (SZSE:301008) market cap up CN¥324m last week, benefiting both private companies who own 40% as well as insiders

Key Insights

• Significant control over Zhejiang Hongchang Electrical Technology 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 63% ownership
• Insider ownership in Zhejiang Hongchang Electrical Technology is 30%

If you want to know who really controls Zhejiang Hongchang Electrical Technology Co., Ltd. (SZSE:301008), then you'll have to look at the makeup of its share registry. And the group that holds the biggest piece of the pie are private companies with 40% ownership. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Following a 16% increase in the stock price last week, private companies profited the most, but insiders who own 30% stock also stood to gain from the increase.

Let's take a closer look to see what the different types of shareholders can tell us about Zhejiang Hongchang Electrical Technology.

See our latest analysis for Zhejiang Hongchang Electrical Technology

What Does The Institutional Ownership Tell Us About Zhejiang Hongchang Electrical Technology?

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 Zhejiang Hongchang Electrical Technology 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. 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 Zhejiang Hongchang Electrical Technology'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 Zhejiang Hongchang Electrical Technology. Zhejiang Hongchang Holdings Co., Ltd. is currently the company's largest shareholder with 36% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 27% and 3.0%, of the shares outstanding, respectively. In addition, we found that Can Lu, the CEO has 2.6% of the shares allocated to their name.

After doing some more digging, we found that the top 2 shareholders collectively control more than half of the company's shares, implying that they have considerable power to influence the company's decisions.

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. We're not picking up on any analyst coverage of the stock at the moment, so the company is unlikely to be widely held.

Insider Ownership Of Zhejiang Hongchang Electrical Technology

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. 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 Zhejiang Hongchang Electrical Technology Co., Ltd.. It has a market capitalization of just CN¥2.3b, and insiders have CN¥684m worth of shares in their own names. It is great to see insiders so invested in the business. It might be worth checking if those insiders have been buying recently.

General Public Ownership

The general public, who are usually individual investors, hold a 23% stake in Zhejiang Hongchang Electrical Technology. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Private Company Ownership

We can see that Private Companies own 40%, 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 2 warning signs for Zhejiang Hongchang Electrical Technology (1 doesn't sit too well with us) 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.