Private companies invested in Gansu Engineering Consulting Group Co., Ltd. (SZSE:000779) copped the brunt of last week's CN¥390m market cap decline

Key Insights

• The considerable ownership by private companies in Gansu Engineering Consulting Group indicates that they collectively have a greater say in management and business strategy
• The top 3 shareholders own 50% of the company
• Institutions own 11% of Gansu Engineering Consulting Group

To get a sense of who is truly in control of Gansu Engineering Consulting Group Co., Ltd. (SZSE:000779), it is important to understand the ownership structure of the business. The group holding the most number of shares in the company, around 49% to be precise, is private companies. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And last week, private companies endured the biggest losses as the stock fell by 9.0%.

Let's take a closer look to see what the different types of shareholders can tell us about Gansu Engineering Consulting Group.

See our latest analysis for Gansu Engineering Consulting Group

What Does The Institutional Ownership Tell Us About Gansu Engineering Consulting Group?

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 Gansu Engineering Consulting Group 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 Gansu Engineering Consulting Group, (below). Of course, keep in mind that there are other factors to consider, too.

Hedge funds don't have many shares in Gansu Engineering Consulting Group. The company's largest shareholder is Gansu Provincial State-owned Asset Investment Group Co.,Ltd., with ownership of 44%. SDIC Juli Investment Management Co., Ltd. is the second largest shareholder owning 3.3% of common stock, and Gansu Water Investment Group Co., Ltd. holds about 2.8% of the company stock.

To make our study more interesting, we found that the top 3 shareholders have a majority ownership in the company, meaning that they are powerful enough to influence the decisions of the company.

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. Our information suggests that there isn't any analyst coverage of the stock, so it is probably little known.

Insider Ownership Of Gansu Engineering Consulting Group

While the precise definition of an insider can be subjective, almost everyone considers board members to be insiders. The company management answer to the board and the latter should represent the interests of shareholders. Notably, sometimes top-level managers are on the board themselves.

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 data suggests that insiders own under 1% of Gansu Engineering Consulting Group Co., Ltd. in their own names. However, it's possible that insiders might have an indirect interest through a more complex structure. It seems the board members have no more than CN¥17m worth of shares in the CN¥4.0b company. Many investors in smaller companies prefer to see the board more heavily invested. You can click here to see if those insiders have been buying or selling.

General Public Ownership

The general public-- including retail investors -- own 40% 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.

Private Company Ownership

We can see that Private Companies own 49%, 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:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Be aware that Gansu Engineering Consulting Group is showing 2 warning signs in our investment analysis , and 1 of those is a bit unpleasant...

Of course this may not be the best stock to buy. Therefore, you may wish to see our free collection of interesting prospects boasting favorable financials.

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.