Chengdu RML Technology Co., Ltd.'s (SZSE:301050) last week's 3.4% decline must have disappointed retail investors who have a significant stake

Key Insights

• Significant control over Chengdu RML Technology by retail investors implies that the general public has more power to influence management and governance-related decisions
• The top 25 shareholders own 47% of the company
• Insiders own 29% of Chengdu RML Technology

A look at the shareholders of Chengdu RML Technology Co., Ltd. (SZSE:301050) can tell us which group is most powerful. The group holding the most number of shares in the company, around 52% to be precise, is retail investors. Put another way, the group faces the maximum upside potential (or downside risk).

While the holdings of retail investors took a hit after last week’s 3.4% price drop, insiders with their 29% also suffered.

In the chart below, we zoom in on the different ownership groups of Chengdu RML Technology.

View our latest analysis for Chengdu RML Technology

What Does The Institutional Ownership Tell Us About Chengdu RML Technology?

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 Chengdu RML Technology 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 Chengdu RML Technology's historic earnings and revenue below, but keep in mind there's always more to the story.

Chengdu RML Technology is not owned by hedge funds. Jieru Deng is currently the largest shareholder, with 20% of shares outstanding. Meanwhile, the second and third largest shareholders, hold 9.1% and 3.7%, of the shares outstanding, respectively.

On studying our ownership data, we found that 25 of the top shareholders collectively own less than 50% of the share register, implying that no single individual has a majority interest.

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. While there is some analyst coverage, the company is probably not widely covered. So it could gain more attention, down the track.

Insider Ownership Of Chengdu RML Technology

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. 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.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

It seems insiders own a significant proportion of Chengdu RML Technology Co., Ltd.. It is very interesting to see that insiders have a meaningful CN¥3.7b stake in this CN¥13b business. 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, mostly comprising of individual investors, collectively holds 52% of Chengdu RML Technology shares. With this amount of ownership, retail investors can collectively play a role in decisions that affect shareholder returns, such as dividend policies and the appointment of directors. They can also exercise the power to vote on acquisitions or mergers that may not improve profitability.

Private Company Ownership

We can see that Private Companies own 10%, 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:

It's always worth thinking about the different groups who own shares in a company. But to understand Chengdu RML Technology better, we need to consider many other factors.

Many find it useful to take an in depth look at how a company has performed in the past. You can access this detailed graph of past earnings, revenue and cash flow.

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.