Institutional investors may adopt severe steps after Guangdong Wenke Green Technology Corp.,Ltd.'s (SZSE:002775) latest 12% drop adds to a year losses

Key Insights

• Institutions' substantial holdings in Guangdong Wenke Green TechnologyLtd implies that they have significant influence over the company's share price
• 50% of the business is held by the top 2 shareholders
• 17% of Guangdong Wenke Green TechnologyLtd is held by insiders

To get a sense of who is truly in control of Guangdong Wenke Green Technology Corp.,Ltd. (SZSE:002775), it is important to understand the ownership structure of the business. With 40% stake, institutions possess the maximum shares in the company. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

And institutional investors endured the highest losses after the company's share price fell by 12% last week. This set of investors may especially be concerned about the current loss, which adds to a one-year loss of 45% for shareholders. Institutions or "liquidity providers" control large sums of money and therefore, these types of investors usually have a lot of influence over stock price movements. As a result, if the decline continues, institutional investors may be pressured to sell Guangdong Wenke Green TechnologyLtd which might hurt individual investors.

In the chart below, we zoom in on the different ownership groups of Guangdong Wenke Green TechnologyLtd.

See our latest analysis for Guangdong Wenke Green TechnologyLtd

What Does The Institutional Ownership Tell Us About Guangdong Wenke Green 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.

We can see that Guangdong Wenke Green TechnologyLtd 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 Guangdong Wenke Green TechnologyLtd, (below). Of course, keep in mind that there are other factors to consider, too.

We note that hedge funds don't have a meaningful investment in Guangdong Wenke Green TechnologyLtd. The company's largest shareholder is Foshan Construction Development Group Co.,Ltd., with ownership of 36%. For context, the second largest shareholder holds about 14% of the shares outstanding, followed by an ownership of 3.2% by the third-largest shareholder. Cong Wen Li, who is the second-largest shareholder, also happens to hold the title of Chief Executive Officer.

A more detailed study of the shareholder registry showed us that 2 of the top shareholders have a considerable amount of ownership in the company, via their 50% stake.

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

Insider Ownership Of Guangdong Wenke Green TechnologyLtd

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.

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.

Our most recent data indicates that insiders own a reasonable proportion of Guangdong Wenke Green Technology Corp.,Ltd.. It has a market capitalization of just CN¥1.2b, and insiders have CN¥207m worth of shares in their own names. This may suggest that the founders still own a lot of shares. You can click here to see if they have been buying or selling.

General Public Ownership

With a 37% ownership, the general public, mostly comprising of individual investors, have some degree of sway over Guangdong Wenke Green TechnologyLtd. 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

Our data indicates that Private Companies hold 6.4%, of the company's shares. Private companies may be related parties. Sometimes insiders have an interest in a public company through a holding in a private company, rather than in their own capacity as an individual. While it's hard to draw any broad stroke conclusions, it is worth noting as an area for further research.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand Guangdong Wenke Green TechnologyLtd better, we need to consider many other factors. Be aware that Guangdong Wenke Green TechnologyLtd is showing 3 warning signs in our investment analysis , and 2 of those are significant...

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.

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.